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Week 6 - External Affairs Power

The extent to which Federalism works successfully is often a reflection of the extent of the dispersion of power between State and Commonwealth governments. The more centralised power the Commonwealth has, the easier it is to achieve national objectives. S 51(xxix) External affairs power S 51(xxix) says 'External affairs' and nothing more - what does this mean? When Australia was federated, the EAP would have been interpreted in the context of the time Australia was still part of the British empire, so it could not operate its external affairs independently of the Imperial Parliament. The extent to which the Commonwealth could operate external affairs was so limited that it could not enact laws that were repugnant to the Imperial Parliament. Eg when going to war, the Queen declares war on an enemy, and the Commonwealth countries also enter the war. This position has changed after the Australia Acts 1986. Legally, Australia is no longer bound legally to any decisions of the Imperial Parliament. It could be the case that the Queen acting in the capacity of the Queen of the UK declares war on a country, Australia would not also be at war with the country. The High Court has recognised that Britain is legally a foreign country. This is not to deny the very strong bonds of a shared heritage with the UK. Clarification of some points: When it comes to international law, Australia as a state is subject to international law, but that does not mean that we as individual citizens of Australia are subject to international law. Australia applies the transformation theory: international law developments will only impact us legally if the Parliament of Australia enacts a law incorporating those international law developments into Australian domestic law. This is not to say that international law doesnt have an enormous normative influence on Australian law. This also applies to international treaties - international treaties are a source of international law. Dietricht v The Queen - international treaties do not have the force of law in Australia unless they are given that effect by statute. The entering into treaties is an executive act - common law prerogative of the Crown. It is not parliamentary. After a signing of the treaty by the executive government, there is a tabling of the treaty in parliament so parliament can discuss the treaty. However, parliament cannot prevent the executive from ratifying the treaty if it so decides. A prerogative is any power that resides in the Crown which hasn't been taken away from it by Parliament. Interpretation of 'external affairs'

Tasmanian Dams case (pg 330) Murphy J (p 341): We have to answer the following questions with respect to what the EAP means: o Does the EAP allow the Cth Parliament to pass a law a) which implements international law (yes); b) to implement any treaty or convention whether general, multilateral or particular; c) does it allow it to implement any recommendation or request of the UN organisation or any subsidiary UN organisation such as the WHO; d) does it extend to laws which foster or inhibit relations between Australia and other nations or particular entities or bodies within Australia and entities or bodies in other countries; e) does it allow for a law which deals with circumstances or things inside Australia which have international concern; f) does the EAP allow for a law dealing with subject matter which is outside Australia (as long as the thing is geographically external to Australia, Cth Parliament can legislative upon it) The question of international concern becomes important. If the Cth Parliament could deal with subject matter inside Australia which are of international concern, then any subject matter that can be shown of international concern could potentially be legislated upon by Parliament - potential to allow Cth Parliament unlimited power o The EAP allows the Cth Parliament to enact laws with respect to each of the above o WARNING! THIS IS NOT THE ACTUAL LAW - just an excellent summary of the issues to address when interpreting the EAP Issue 1: Geographical externality Includes things outside Australia or things inside Australia that have international concern. It is settled that under the EAP, the Cth can legislate with respect to Australia's relations with foreign nations, or anything affecting our relations with foreign nations: The King v Sharkey. The King v Sharkey (1949) FACTS: At issue was the prosecution of Sharkey, who was a communist He was prosecuted under the offense of sedition - it was an offence to incite disaffection against the government of the UK or any of the King's dominions Sharkey argued that Cth cannot legislate under the EAP to create the offence of sedition against another country JUDGMENT: The EAP does allow the prohibition of conduct in Australia which affects our relations with other countries Other examples where this would be relevant: extradition laws, laws which relate to the taking of judicial notice of foreign judgments. In the case of Koowarta v Joe B-Pettersson, Brennan J suggested that the Sharkey principle should extend to include relations with international persons generally, not just foreign states (ie including bodies such as the UN). Principle 1: Conduct within Australia which does affect our relations with other countries can be regulated by the Cth under the EAP.

Geographical externality per se - conduct not within Australia but any subject matter that is merely external. Is it enough to say that merely because the subject matter is external, the Cth can legislative regarding it? Seas and Submerged Lands case (1975) (p 309) Barwick CJ: The EAP extends to anything which in nature is external to Australia Mason J: Extends to matters or things geographically outside of Australia Polyukovich v The Commonwealth (1991) (p 309) This case does confirm that geographic externality is enough FACTS: There was an attempt in this case to qualify the geographical externality principle The case was concerned with the validity of the War Crimes Amendment Act 1988 - made certain activities committed in Europe during WWII war crimes o If a person who committed those crimes at that time is in Australia, they can be prosecuted irrespective of their nationality at the time of the commission of the crimes The types of activities classified as prosecutable war crimes were what would have been caught in any civilised nation's criminal law The question is under the EAP, is such a law valid? If adopting the geographical externality principle without any other requirements or caveats, then the law would be a valid exercise of EAP JUDGMENT: Dissenting o Gaudron J - need a connection or nexus with Australia for the law to be valid o Brennan J - the word 'affairs' must be interpreted as the external affairs of Australia, not external affairs that have nothing to do with Australia - the connection between Australia and the crimes committed by Poly were too tenuous Brennan J adopted the majority view in the later Industrial Relations Act Case o Toohey J agreed with Brennan J to the extent of requiring a nexus, but given Australia's involvement in WWII, there was a sufficient connection Dawson J (majority): 'The word "external" is precise and is unqualified. If a place, person, matter or thing lies outside the geographical limits of the country, then it is external to it and falls within the meaning of the phrase "external affairs"' The majority position was confirmed in the Industrial Relations Act case Industrial Relations Act case Geographical externality is enough to make a law valid under the EAP Horta v The Commonwealth (1994) (p 310) FACTS: There was a bilateral treaty between Australia and Indonesia which related to the joint exploitation of the natural resources in the Timor Gap region. As a result of this treaty, Australia passed legislation to put it into effect It is important to note that the Timor Gap was an area claimed by both countries as a part of their continental shelf, but it was not in the territorial waters of either country o An aside - must learn how to look at facts and how principles can apply to facts will help with doing well in FedCon The plaintiffs were disputing Indonesia's assertion of sovereignty over East Timor, which was assumed during the making of the treaty. Accordingly, they were arguing that the 1989 treaty

was void in international law. The consequence to the Australian law is that if the treaty is void, Cth cannot engage the EAP to enable Parliament to pass legislation pursuant to the treaty The High Court in this case did not want to get dragged into an international dispute JUDGMENT: High Court used geographical externality to uphold the validity of the law - it did not require the validity of the treaty The exploitation of resources in a region outside Australia is geographically external subject matter, which is enough to engage the external affairs power to make valid the relevant law There is no basis in s 51(xxix) or other provisions of the Constitution that s 51(xxix) power must be confined within the limits of "Australia's legislative competence as recognised by international law" XYZ v The Commonwealth [2006] Judges began questioning the geographical externality principle At issue here was an amendment of the Cth Crimes Act - made it an offence for an Australian citizen, while resident outside Australia, to engage in or attempt to engage in sexual intercourse with a minor. This was trying to prevent the abhorrent activity of child sex tourism The plaintiff was charged under this law - challenged the constitutional validity of the Cth law had to overcome the geographical externality principle JUDGMENT: The majority simply relied on the geographical externality principle to hold the Cth law valid Kirby J, although holding the law valid, felt that the principle of geographical externality was really not sufficiently elaborated to be accepted and applied as a doctrine in Australian constitutional law. He relied on the principle that it affected Australia's relations with other nations Callinan & Heydon JJ (dissenting) held the Cth provisions were invalid and argued that the geographical externality principle should be rejected - to the extent that the decisions of the earlier cases relied on that doctrine, they should be overruled It is unlikely that XYZ will have an impact in changing the doctrine of geographical externality. When answering problem questions, just note that doubt has been cast on this doctrine.

Issue 2: international treaties When Australia enters into an international treaty, does it enter into the head of power, enter into treaties and pass a law. If we allow the Cth to enter treaties and make laws implementing those treaties, can we allow the Cth to make laws outside of s 51 powers? If yes, then the Cth can legislative with respect to any subject matter, as long as it comes under an international treaty. The King v Burgess; ex parte Henry (1936) An issue in this case was that the particular provisions of the Air Navigation Act were purported implementation of the International Convention on the Regulation of Aerial Navigation Issue - could Cth rely on the treaty to implement the relevant law under the EAP The importance of this case is that it set the groundwork for the two competing constitutional theories:

Majority view (McTiernan & Evatt JJ, with Latham CJ agreeing) - if there is an international treaty of which Australia is a party, that is enough for the EAP to enable the Cth to implement the subject matter of the treaty into law, irrespective of whether the subject matter was within a s 51 head of power. This does not just apply to treaties, but to any international agreement, including draft conventions, recommendations and informal international agreements The ratio is limited to international treaties (because that was what the case was about). The entire breadth of this doctrine is not ratio Caveat - the bona fide requirement. Entry into a treaty by Australia must be made bona fide Dixon & Starke JJ view - the law that implemented the treaty would only be within the EAP if the subject matter of the treaty being implemented was itself of sufficient international significance or indisputably international in character (Dixon J). It would be an extreme view to suggest that any subject matter of an international treaty ratified by Executive would enable Parliament to implement it into law, which but for the treaty, relates to a matter of internal concern rather than external affairs This test would pull the Court into areas of foreign policy

When passing a racial discrimination law, is the matter of race an international subject matter, or are they only Australian affairs? Koowarta v JBP (1982) (p 315) This is one of the major cases. FACTS: In the state of Qld, there was a law that had been passed which essentially enabled the relevant Minister to determine who could own the freehold or leasehold in land in terms of indigenous persons. If a group of aborigines wanted to acquire large tracts of land, they had to get the approval of the Minister. The Minister would not give approval for freehold or leasehold if the aborigines were acquiring it alone - there had to be a group of Europeans as well. The Koowarta had entered into a contract to acquire the leasehold for the relevant Qld pastoral property The Minister refused on the basis of the Qld policy Koowarta argued that the Qld law was in breach of the Racial Discrimination Act of the Cth - s 9 prohibited racial discrimination in any form; s 12 prohibited racial discrimination directly in relation to the disposition of property Qld argued that the Cth law was invalid because there is no power for such a law to be made applicable to individual states in this particular way Cth argued that it was implementing an international treaty (International Treaty on the Elimination of All Forms of Racial Discrimination) If adopting the McTiernan & Evatt view, there is no problem If adopting the Dixon & Starke view, there is a potential problem that racial affairs are not international issues and therefore the EAP cannot be used to implement laws on matters of race JUDGMENT: Mason, Murphy, Brennan JJ: Adopted that aspect of the McTiernan view that it is enough under the EAP to implement an international treaty - dont need to ask the next question of whether the subject matter was of international significance Gibbs CJ, Aikin & Wilson JJ:

Adopted Dixon view - need to ask if the subject matter was of international significance. If that question is asked independently of the treaty, race was not a subject that was of international significance The Act dealt with a purely domestic matter - rendered unlawful an act done within Australia and taking effect only within Australia Stephen J: Joined Gibbs side on the law and joined Mason side on the outcome On the law, yes the subject matter of the treaty had to be of international significance o This must be determined by the Court when interpreting the treaty On the outcome, he held that the Racial Discrimination Act was valid because race was a subject matter of international significance, particularly after the genocide of WWII An intrusion by the Commonwealth into areas previously the exclusive concern of the States does not mean a shift in Federal/State balance of legislation powers. It is a growth in the content of "external affairs" to reflect new global concerns (eg human rights) and the need for universally recognised norms of conduct The ratio - adopt the approach of the judge that is both in the majority on the law and the majority on the case. So yes, do need subject matter to be of international significance, but that is to be interpreted liberally instead of narrowly like Gibbs & co did. In essence, it would be difficult to say that the subject matter of any international treaty is not of international importance, as ipso facto the fact that there is a treaty means it is internationally significant. The Dixon & Starke view prevails to the extent that you do need the subject matter of the treaty to be internationally significant, but applied liberally per Stephen J. However, the risk is that Stephen's approach requires judges to make a decision on whether a matter is of international significance realm of foreign policy. The Kooarta majority is very weak/vulnerable. It would be foolhardy to make a definite prediction on which way a matter would go using just this case. The Gibbs, Aikin & Wilson view - best rationale found in Gibb CJ's judgment (p 326, last paragraph). Gibbs CJ: If we do not impose any limitation on the EAP, we are effectively giving a blank cheque to the Commonwealth. There are so many international treaties on just about any subject matter that it could not have been envisaged in 1900 by the framers. This would render redundant s 51 of the Constitution o "External affairs" considered as a whole means matters concerning other countries does not include treaties dealing with purely domestic matters o No limit on EAP = Executive can, by its own act, determine the scope of Commonwealth power Gibb's real concern is that it undermines the federal nature of the Australian Constitution if the Commonwealth has such a wide scope of legislative power o Not an argument for States' rights or reserved State powers, but that the Constitution has a minimum guarantee that the States must have some legislative power that is autonomous to them o Have regard to the federal nature of the Constitution when construing the scope of s 51 power It is perfectly appropriate to interpret the Constitution in such a way that you at least preserve a minimum guarantee of the legislative power of the States Any subject matter may constitute an external affair, provided that it involves a relationship with other countries or with persons or things outside Australia

An Act with purely domestic operation does not become international in character simply because other nations share a similar interest in Australia's policies and practices

Mason J's judgment is the leading judgment for the McTiernan view (p 316). Mason suggests that Gibbs' approach is a reserve State powers thinking - this is somewhat unfair. It is more of a federal balance approach to interpreting the Constitution, such that it retains its federal nature. Mason J: The strict view is a failure to acknowledge the plenary nature of the power and its important purport o Allows parliament to both legislate its ratification and implementation Very concerned with the fragmentation of the decision making process in implementing treaties, if the process is allowed to give consideration to the States o It goes too far to say that any power not given to the Commonwealth inalienably belongs to the States o Any disturbance of the balance between Cth and State powers is a necessary disturbance For Australia to be able to operate as an independent nation on the world stage, the Commonwealth must be able to implement its international obligations without having to refer matters back to the States o Such division of responsibility between Commonwealth and the States would lead to indecision, confusion, and seriously weaken Australia's stance and standing in international affairs o Mason tends to look at substance over form, and practical consequences as opposed to mere legalism Unless we allow the EAP to give the Commonwealth power to implement its international obligations, Australia cannot operate as a nation Mason appears to reject the federal balance notion, or at least put it to a lower level priority than the EAP Mason is not overly concerned about giving the Commonwealth a blank cheque because the behaviour of the Commonwealth was not and never is to go find international treaties that it can ratify to extend its legislative power. Mason trusted that the Commonwealth would only implement international treaties that were important enough to implement o Exercise of EAP is subject to the express and implied prohibitions in the Constitution Multiple characterisations (Fairfax) - ask if the law is with respect to external affairs, not whether it is with respect to internal affairs. As long as one characterisation is wrt external affairs, the law is valid notwithstanding another characterisation is outside the EAP S 51 powers should be construed liberally: Jumbunna Coal Mine v Victorian Coal Miner's Association (1908) per O'Connor J "[in construing the Constitution] the Court should...always lean to the broader interpretation unless there is something in the context or in the rest of the Constitution to indicate that the narrower interpretation will best carry out its object and purpose." o Approved by Dixon J in Bank of NSW v Commonwealth (1948) A genuine treaty, especially multilateral or UN Convention, in itself relates to a matter of international concern and external affairs Tasmanian Dam Case FACTS: Tasmania was planning to set up a hydro-electric system similar to the NSW dam, which was conducive to the economic development of the State

In order for Tasmania to establish the hydro-electric system, it had to dam the Franklin River, which could have flooded and wiped out pristine forests of world heritage The Cth Government wanted to stop the damming of the river Cth cannot just pass a law on how Tasmania uses its land - no direct power under s 51 Hawke Government relied on the World Heritage treaty to pass Cth law implementing world heritage protection - World Heritage Properties Conservation Act 1983 (Cth) o S 6 enabled the Cth to identify particular areas for protection o S 6(3) then empowers the GG acting on advice to declare certain properties as being worthy of protection. If under s 6(3) such a declaration is made, s 9 applies to the property o S 9 lists all the things that cannot be done on the land S 6(2) is the critical element to the case o Sets out the different rationale for the Cth to have legal power over different properties in an external affairs sense o S 6(2)(a) Cth has power to pass a law under s 6 at the request of a State Tasmania did not request the Cth pass a law to protect the Franklin River o S 6(2)(b) The protection and conservation of property in Australia is a matter of international obligation whether by reason of the Convention or otherwise This was the provision that the case was decided on Cth tried to clarify the law in Kooarta - 'matter of international reason of the Convention' JUDGMENT: In this case, Mason, Murphy and Brennan JJ were still on the bench, Gibbs Cj, Aickin and Wilson JJ were also on the bench, but Aickin was killed in a car accident on the way to court replaced by Dawson, who was conservative Stephen J was replaced by Deane J, who was extremely left wing - sided with Mason & co Mason, Murphy, Deane and Brennan JJ held that the mere implementation of the treaty gave the subject matter its international significance, therefore the Cth law was valid (paid lip service to the Dixon view) o From a practical point of view, the existence of a treaty is enough When the Court held that s 6(2)(b) was valid, it did not severe the words 'or otherwise'. This means that all that is needed to invoke the EAP is an obligation under international law, not necessarily found in a treaty Mason J: What is meant by subject matter of international concern? o No persuasive reason for thinking that the subject matter of international concern/character is confined to that part of a treaty which imposes an obligation on Australia - too narrow a view o Any test hinging on a relationship between Australia and an external party has the problem of definition - what subject matter affects Australia's relations with other countries and what doesnt Cannot treat the universal pursuit for humanitarian, cultural and economic objectives as lacking international character simply because laws passed under these treaties do not affect Australia's relations or operate domestically If a topic becomes the subject of international cooperation or an international convention it is necessarily international in character - appropriate for the creation of international relationships Whether a subject matter is of international concern is not a question that the Court can or should answer - best left to Parliament "s 51(xxix) was framed as an enduring power in broad and general terms enabling the Parliament to legislate with respect to all aspects of Australia's participation in international

affairs and of its relationship with other countries in a changing and developing world and in circumstances and situations that could not be easily foreseen in 1900" Gibbs CJ (dissenting): Maintained that a law giving effect to an international agreement will only be a valid exercise of EAP if the agreement is with respect to a matter which itself can be described as an external affair Division of powers between Commonwealth and States rendered meaningless if Cth government could, by entering into treaties on matters of domestic concern, enlarge Cth legislative powers to embrace any activity o Possible even if Cth enters the treaties in good faith o S 51(xxix) must be construed to avoid this consequence Zines: the ratio of the case is confined to the power of the Commonwealth to give effect to an obligation at international law. Obiter - draft conventions, recommendations, informal international agreements. In Industrial Relations Act case, majority quoted without disapproval the views of Evatt and McTiernan JJ in Burgess regarding the implementation of recommendations and draft international conventions What we are now faced with is the minority try to preserve what it can, and the new majority trying to take the principle even further - Mason, Murphy and Deane JJ said that an obligation is not even needed - something less is enough. It is enough if the treaty makes a mere recommendation to invoke the EAP. Brennan J said this case is not about recommendations or anything less than an obligation - that being so, did not need to decide on it to resolve the case. Brennan J tends to restrict himself to deciding only the law that is necessary to resolve the case. This is the most appropriate judicial technique - judges are only there to decide the case on the matters that appear before the court.

Limits to the EAP The EAP is subject to the Constitution, just like all s 51 powers. It also cannot be invoked to implement an international obligation that would be inconsistent with a section of the Constitution. The second limitation to the EAP is that the treaty must be entered into bona fide. This is more of a 'half limitation' because it is difficult to imagine the Cth entering a treaty in a non-bona fide manner. Gibbs CJ in Koowarta: "The doctrine of bona fides would at beast be a frail shield, and available in rare cases" The most important limitation is the conformity principle - the law that is being implemented on the basis of the treaty must itself conform to the treaty sufficiently enough to be valid. The law that emerges must conform at least to a certain extent with the obligations created by the treaty. Mason J - the law must conform with the treaty and carry its provision into effect. Test for conformity principle - the margin of appreciation test: Deane J in Tasmanian Dam Case (p 345)

'The law must be capable of being reasonably considered to be appropriate and adapted to achieving what is said to impress it with the character of a law with respect to external affairs.' o 'impress it with' - refers to treaty obligations Dixon J in Burgess: "No doubt the power includes the doing of anything reasonably incidental to the execution of the purpose. But wide departure from the purpose is not permissible, because under colour of carrying out an external obligation the Cth cannot undertake the general regulation of the subject matter to which it relates." Need reasonably proportionality between the purpose or object and the means for achieving or procuring it. Absence of reasonable proportionality between the law and the purpose of discharging the obligation would preclude characterisation as a law with respect to external affairs

Deane J gives the example of all sheep in Australia being slaughtered. Another eg: Sharkey principle - Cth imposes a law that makes it illegal to publicly burn the flag of any country in Australia, with a $200 fine for breaching this law. This would be valid under the Sharkey principle. However, is the law capable of being reasonably considered to be appropriate and adapted to preserving international relations? It is not the consideration of the judge or any other person that a law is reasonable. It is whether a law is capable of being reasonably considered to be appropriate and adapted, even if the judge personally thinks it is inappropriate. Parliament has passed a law, so the court will give parliament a margin of appreciation - deference to the Parliament. Courts do not want to get involved with political considerations. Dawson J's objection to the test: If Parliament has passed a law, it is obvious that it has given the law a lot of thought The fact that Parliament passed the law must mean it is capable of being reasonably considered to be appropriate and adapted to achieving the end Richardson v Forestry Commission This case expanded further the margin of appreciation test FACTS: Cth law passed pursuant to the same treaty as in Tasmanian Dam Cth law established a commission inquiring into the heritage of two forests in Tasmania for the purpose of making a submission to the GG as to whether these forests should be protected under world heritage listing o The Court had found that the treaty did impose an obligation to identity such areas for preservation At issue in the case was s 16 of the Act - whilst an inquiry was being made as to a particular piece of land, no act is permitted on that land which undermines its heritage value For the Act to be valid, there must be an obligation under a treaty or otherwise that no act undermining a piece of land's heritage value while it was under inquiry JUDGMENT: Majority held that s 16 was valid in spite of the lack of an international obligation The EAP enables the Cth not only to give effect to any international obligation, but a power to make laws which are necessary or appropriate to give effect to that international obligation essentially an incidental power to the EAP Deane & Gaudron JJ rejected the use of incidental power in this circumstance - not necessary or appropriate

As far as Deane & Gaudron were concerned, the land was private land and not that of the Cth, so the persons owning the private land have a right to use that land for whatever purpose during the inquiry, and can only be restricted from using the land after a world heritage listing has been made The Deane & Gaudron view has never been resuscitated

Victoria v The Commonwealth (Industrial Relations Act Case) (p 350) FACTS: The Industrial Relations Act 1988 (Cth) imposed on employers various fair employment measures such as minimum wages, equal pay, unfair dismissal laws, leave, collective bargaining, a right to strike o If there is a right to strike, the strikers cannot be punished if they have a valid reason to strike The Cth relied on a number of conventions of the International Labour Organisation (a UN organ), but also on a number of recommendations adopted by the general conference of the ILO o These recommendations were more general and specific JUDGMENT: Reliance on these recommendations was valid for invoking the EAP However there may be some treaties that do not enliven s 51(xxix) - eg treaty expressed in terms of aspiration "to promote full employment" Full implementation of all obligations under a treaty (implied by Evatt & McTiernan JJ in Burgess) is not an essential requirement of validity: Tasmanian Dam Case o Deane J in Tasmanian Dam: Parliament can partly implement treaty obligations and leave the outstanding obligations unimplemented or to the States to implement Reasons given by the majority: o It adopted the margin of appreciation test - Tasmanian Dam case o It confirmed the geographical externality principle - Polyukovich o It explained further the margin of appreciation test - introduced the principle of partial conformity to a treaty. What happens when Cth law only partially implements a treaty obligation? This depends on what type of partial implementation it is - there are two types: Quantitative partial implementation - eg treaty has 10 recommendations and 10 obligations, and the Cth law fulfils 5 recommendations and 2 obligations. The Cth law is valid if there is quantitative partial implementation, unless the obligation in the treaty is to implement the treaty as a whole. Only then will a quantitative partial implementation render the law invalid (law does not conform to the treaty) Qualitative partial implementation - eg an individual obligation in a treaty contains with it a requirement that you give a benefit but also impose a burden. If the Cth passes a law that only implements the benefit without implementing the burden, there is qualitative partial implementation and will not pass the conformity test because the law does not conform to all the requirements of an obligation being implemented The Deane test is the ultimate test - does the law conform with the treaty? On the facts of Victoria v The Commonwealth, there were international conventions and recommendations that explained the conventions. The Court held that both were a legitimate source of the EAP. However, what is left unclear is this - conference is not a treaty. Say you unhinged the recommendations from the treaty - could the Cth use those in isolation to implement a law? The High Court left this matter ambiguous. What is definite in this case is that if there is a conference attached to a treaty or convention that explains it, it is a legitimate source of EAP. It is unclear what

would happen if the conference is detached from the convention, though the Evatt & McTiernan would say that this is also legitimate. The more precise the treaty, the less room there is for advocacy and the less room there is for the judge to exercise discretion. If the treaty requirements are very general or broad, there is great scope for advocacy. Note 5, p 354 casebook: This note tidies up the Industrial Relations Act case. The ratio is that the Cth can rely on recommendations of international Conferences when they are interpreting treaty provisions (especially if provisions are general or vague). Sometimes, there is a principle which says that if the treaty provision itself is so open ended/general, then the Cth cannot rely on it - this could potentially give the Cth unlimited power to implement the treaty since the treaty provision is so ambiguous that it could allow almost anything to be done. Eg if the treaty is so general in its terms that the Cth can do something completely opposite to it and still be within treaty terms, then the Cth cannot use the provision to exercise the EAP. Zines: Specificity principle If the treaty principle is so ambiguous, the specificity principle would prevent it from being implemented by the EAP. However, Zines' approach is too narrow - rather, such provisions cannot be implemented because we cannot apply the conformity principle to it. Final point: If there was a treaty provision that was so ambiguous, an Australian law relying on it would be invalid. However, what if an international Conference saves the provision by saying that countries should do "X, Y and Z". Eg if the treaty is for reducing the impact of narcotic drugs, and the conference recommends decriminalisation, the Cth can place reliance on this recommendation even if reliance on the treaty alone (which would be too ambiguous) was not enough to implement the law. What is unclear from the case is whether the Cth can rely on conference recommendations that are independent of any treaties. The difficulty is that what the majority do is they cite Evatt & McTiernan but dont endorse it to come to their conclusion - whilst they cite Evatt & McTiernan, they don't unequivocally endorse their approach. We are not sure whether they are actually saying that even without the treaty, the conference recommendations would be enough. Read in context, it seems this is what the Court was saying. We can only be confident that the judges are adopting the legal position that resolves the facts before them. The facts did not require for them to decide whether recommendations independent of treaties could be relied upon. In the end, the Evatt & McTiernan view has won the day, with the tiny exception of conference recommendations that are independent of any treaty. The gist of the cases suggest that this could also be relied upon.

Pape v Commissioner of Taxation (2009) Hayne and Kiefel JJ: Tax Bonus Act is not an appropriate and adapted response to the global financial crisis - not a law with respect to an external matter - payments to Australian taxpayers to support Australian economy

Australia did not undertake an international obligation sufficient to found the Act under EAP o The G-20 declaration was not an international agreement in form of treaty or convention - aspirational rather than obligatory. Each nation to respond in its own way to the crisis o The IMF and OECD recommendations were independent of any treaty or convention and are aspirational Heydon J: Rejected submission that legislation under s 51(xxix) is valid if it relates to external causes of conditions in Australia - unsupported by authority o Law regulating matters or things within Australia is not valid under EAP simply because the need for regulation is caused by external matters o "Law relating to a consequence is not necessarily a law relating to its cause" No authority stating that any matter of international concern was an external affair for the purpose of s 51(xxix) - doubt cast on geographical externality in XYZ v Commonwealth but not conclusive "Comity with foreign governments" is not enough to bring internally operating legislation within EAP Defendant argued the Act implemented an international commitment: o The treaty or commitment relied on must set out a defined regime with "sufficient specificity to direct the general course to be taken" - G-20 declaration and IMF recommendation didnt do this o G-20 declaration was aspirational - external affair does not exist where all that is stated is a "broad objective with little precise content and permitting widely divergent policies" - Victoria v Commonwealth o The court in Victoria v Commonwealth declined to decide whether legislation implementing recommendations independent of treaties could be supported by s 51(xxix) Heydon J held that it is not supported by s 51(xxix) - recommendations independent of treaties do not create international obligations Pape seems to decide conclusively that recommendations independent of a treaty or convention do not support s 51(xxix) because no international obligations are created.

Week 7 - Corporations power

S 51(xx) Corporations Power P 191 S 51(xx): ...with respect to "foreign corporations and trading or financial corporations formed within the limits of the Commonwealth" The significant thing to note is that the corporations power relates to persons, rather than activities subject matter relates to corporations. This is a persons/people power. A company is a legal person that has separate legal personality. It can do certain things and engage in certain activities. The critical thing about a company is that it limits the liability of the people who are behind the company - a "corporate veil". The Constitution only provides for certain types of corporations that can be regulated - foreign or trading or financial corporations formed within the limits of the Cth ("constitutional corporations"). If a corporation is not one of the types above, it cannot be regulated by the Cth. "...formed within the limits of the Commonwealth" How far does the Cth power over the person extend? Does it extend only to the entity itself and its legal capacity, or can the Cth also regulate corporate activities? How far can the Cth go, and can it regulate the internal relations and activities of a company? Can it regulate the external relations (public dealings) of the company? What role does the incidental power play - eg to what extent will the corp power allow Cth to control non-constitutional corporations? If the corp power was extended to allow the regulation of the trading activities of the corporations, there would be no distinction between inter and intrastate activities (unlike the trade and commerce power). This would render the trade and commerce distinction and power almost obsolete - the vast bulk of important trade and commerce is essentially run by corporations o To what extent has this been allowed to happen? (p 189) o Originally, Harrison Moore wrote that the corp power was to be interpreted liberally, and did include the power to regulate corporate activities, not just a corporation as an entity and its legal capacity o High Court did not adopt Moore's view. When the issue first came to the High Court in 1909 (Huddart Parker), the Court said that under no circumstances does the corporations power extend to the activities of corporations - nothing beyond the entity and legal capacity of the corporation. This is classic reserve state powers thinking (this case was prior to Engineers' case) Griffith CJ: s 51(xx) empowers the Cth to prohibit a trading or financial corporation formed within the Cth from entering into a field of operation, but not to control the operations of a corporation which lawfully enters upon a field of operation reserved for states o This decision resulted in the corp power lying dormant for 60 years, and the enactment of different corporations law in the States. Eventually the States formed a uniform legislative code, but it was legislated by the individual States themselves There was a revival of the corporations power in the 1970s. In the 1970s, attempts were being made to abolish anti-commercial activity. There was an attempt to established the Trade Practices Act in the 1960s.

Strickland v Rocla Concrete Pipes (1971) At issue was the first Trade Practices Act Cth sought to regulate certain trading/business activities of constitutional corporations S 35 of the Act said that certain restrictive trading or anti-competitive activities would be examinable by the commissioner S 41: certain details of these arrangements had to be provided to the commissioner In this case, the D was a party to an agreement to raise prices and it was charged under the Act for not providing particulars under this Act to the commissioner Originally, the charges were dismissed because the Court applied Huddart v Parker - said you cannot regulate corporations per se The Court overruled the Huddart case because it was before the Engineers case and the reserve state powers thinking tainted the case JUDGMENT: Corporations power did include a power to regulate the trading activities of trading corporations and financial activities of financial corporations. The significance of this was that it did not matter to the HC whether this dealt with inter or intrastate activities o A valid law with respect to s 51(xx) need not be limited in its operation to foreign or interstate trade o However, the Act was unconstitutional anyway because it had undistributed provisions sought to apply to all corporations without distribution, so no part of the law could be saved o HCA held that s 7 (definitions) was so convoluted that it failed to distributed the provision Barwick CJ: "The subject matter will be determined by construing the words of the Constitution...irrespective of what effect the construction may have upon the residue power of [the States]" Barwick CJ was unwilling to set outer limits of the power - need to decide that on a case by case basis. The court stated that s 51(xx) may extend beyond legislating on the trading/financial activity of trading/financial corporations, but did not decide on this matter Need to ask whether Parliament has enacted a law with respect to s 51(xx) (as construed in this case) 1. Can what the Parliament has enacted be so construed as to disclose such a law? 2. Did the Parliament intend such a law? An amendment rectified the TPA and was made clearly applicable only to trading and financial corporations There are two diametrically opposed positions: Broad view - why limit it to applying only to trading activities? Narrow view - limit it to only trading activities otherwise the power would get out of hand Actors Equity v Fontana Films (1982) FACTS: The actual provision challenged was s 45D(1)(b)(i) - this provision prohibited secondary boycotts - prohibited one person from acting in concert with another person to hinder the supply of goods or services to a corporation A dispute arose between Actors Equity (a union) and Fontana Films. The union, in order to get to the company, entered into an arrangement with an agent to prevent the agent supplying actors to FF o This activity was prohibited by the TPA - purported to regulate the activity of third party non-corporates. The boycott was not a trading activity, so can it be regulated? JUDGMENT:

High Court held that the boycott activity could be regulated Principle - corporations power permits the regulation of activities which might do damage to the trading activities to trading corporations. Any activity, even if it is not the activity of the company, but which can do damage to the company, can be regulated. This is so even if the corporation is only one of many parties affected, parties which are outside Cth legislative power o The corporations power allows the Cth to protect the trading activity of trading corporations, even if it means controlling third party, non-corporate activities o The law must operate directly on the subject of the power. A law which protects trading activity of trading corporations by operating outside the subject of the power, eg a law prohibiting the levying of duties on trading activities, is neither a law with respect to corporations nor a law with respect to trading corporations - the law does not operate directly upon corporations and cannot be characterised as a law about them Mason & Aikin & Murphy JJ adopt the broad view of the power - any activity of a corporation can be regulated, and thus can extend to third party activities that can damage corporate activities Gibbs CJ and Wilson J insisted on the narrow view but extended it to allow for the protection of the trading activities of trading corporations o S 51(xx) does not empower parliament to pass a law prohibiting any conduct that might damage a trading corporation - only conduct that is calculated to damage the trading activities of the trading corporation o If the law has an actual and immediate operation within a field of Cth power, it will be valid notwithstanding that it has another purpose which could not be achieved directly by the exercise of Cth power Brennan and Stephen JJ applied the narrow view to reach the same decision, but did not decide on which view was correct o Brennan only stated the law as necessary to resolve the case before him and did not speculate about the law which did not concern the parties at the case The ratio of the case did not include the broad view of the corporations power (4:3) FURTHER FACTS: S 45D(5) - deeming a constitutional fact that if an officer of a union participated in a secondary boycott, the union is deemed to have participated unless it could establish that it took all reasonable steps to prevent the participants from engaging in such conduct This was held to be invalid o Mason J: this is not a reversal of onus of proof provision. Proving that the union did not act in concert with the officer is not enough to escape this provision - need to go further and show that it took all reasonable steps to prevent the participants engaging in that conduct o Brennan J: a law which purports to impose liability upon an organisation which takes no participatory or preventative steps in the conduct in which its officers not a law with respect to corporations Tasmanian Dam case FACTS: Attempt by the Tas government to set up a hydro electric scheme in Tas, including damming the Franklin river The Cth parliament enacted a law prohibiting the conduct of certain types of activities for world heritage declared areas S 9 - list of activities which are prohibited - excavation, building, damaging, road construction, and any other activities can be proscribed which may damage the property o Under s 9, a regulation was made prohibiting the building of the dam

S 10 - all of the activities in s 9, if carried out by a constitutional corporation, o This section was added because the Cth was not sure if they were within the EAP S 10(2) - all of the activities in s 9 are prohibited whether or not they are engaged in as part of the trading activities of the trading corporation (pitching at the broad view, hoping that HCA would adopt the broad view) S 10(4) - the activities listed are prohibited only when they are carried out for the purposes of the corporation's trading activities (the hydro electric commission) o The hydro electric commission engaged in the production and sale of electricity. By selling electricity, it was engaging in trading activity and was thus a trading corporation o The company argued that the activities listed under s 9 were not part of its trading activities, therefore the Cth had no power to prohibit it from carrying out those activities o Cth argued that it was for the purposes of conducting the company's trading activities creating an extra source of electricity and then selling it - rely on s 10(4) JUDGMENT: The High Court extended the corp power to the application of s 10(4) Ratio of the case - the corp power permits the regulation of activities, not being trading activities themselves, but are preparatory to or for the purposes of the trading activities of trading corporations Mason, Murphy, Deane & Brennan JJ accept this position, as does Gibbs CJ o Gibbs CJ, who was always a strong defender of States' rights, may have been tricked by clever legal arguments into accepting this position Mason J: three objections to a narrow construction of s 51(xx) 1. Narrow construction (limited to acts for the purposes of trading activities of trading corporations) is implausible to financial and foreign corporations. Cannot be intended that s 51(xx) is limited to foreign aspects of foreign corporations and financial aspects of financial corporations. Also cannot limit power with respect to trading corporations and leave plenary for financial and foreign corporations 2. Legislative power conferred by the Constitution should be construed liberally 3. Power to make laws with respect to corporations (which are persons) naturally extends to their acts and activities Mason J: The requirement of substantial connection between the exercise of power and its subject matter does not mean that the connection must be "close". It must not be "so insubstantial, tenuous, or distant" that it cannot be regarded as a law with respect to the head of power - Melbourne Corporation (1947) S 51(xx) is non-purposive - enough that the law has a real relationship with the subjects of the power; it matters not that the object is to attain some goal in a field outside of Cth legislative power This position would give the Cth almost unlimited power to regulate corporations - most if not all of what corporations do are related to their trading activities In relation to s 10(2) (which is the broad view), this was found to be valid only by Mason, Murphy & Deane JJ o Again, the broad view does not become ratio by 3:4 o Wilson, Dawson & Gibbs said that s 10(2) was invalid o Brennan J again did not decide on s 10(2) because he decided the case on s 10(4) However, Brennan never denies the extension of power when it is available. He just doesn't do any more than is necessary to resolve the present case Regarding the hydro corporation itself, it was held that it did trade in electricity and was not insubstantial, so enough to render it a constitutional corporation The security of the narrow view is shaky given the persistence of this broad view that Mason, Murphy and Deane JJ keep following.

The corporations power has been extended to activities that are preparatory to or for the purposes of the trading activities of trading corporations. The judges of the narrow view are emphasising the federal aspects of the Constitution - let the corp power go, and you are giving the Cth a blank cheque to regulate all corporate activity in the country.

Re Dinjan (1995) (p 224) FACTS: The Industrial Relations Act 1988 ss 127A and 127B gave the Industrial Relations Commission the power to review and vary contracts to which independent contractors were a party, if the contracts were unfair, harsh or contrary to the public interest o An independent contractor is a person or business that is separate from the business that contracts them to do work. Independent contractors often sub-contract out their work In certain circumstances, the contracts that these ICs were party to could be reviewed by the IRC S 127C(1) - only the following contracts reviewable under ss 127A and B o Those contracts to which a constitutional corporation was a party a. The issue here is that the contract may be too broad - does not distinguish between contracts relating to trading activities and those that dont (would be okay if the broad view was taken) b. Those contracts which related to the business of a constitutional corporation - the significance of this subsection is that it does not require a constitutional corporation to be part of the contract. If there is a contract which relates to the business of a constitutional corporation, that contract is reviewable even if the parties to the contract are natural persons. This is the kind of provision that the narrow view judges were concerned with when broadening the scope of the corp power. This expands on Actors Equity, which required there to be damage to a constitutional corporation What the Cth wants to do here is to regulate contracts between independent contractors c. Contracts entered into for the purpose of the trading activity of a constitutional corporation (corporation had to be a party) This would be valid because Tasmania Dam says that Cth can regulate trading activities of trading corporations The corporation, Tasmanian Pulp and Forest Holdings, conducted a woodchip business. TPFH entered into a contract with an independent contractor (Wagners), who would harvest and transport the timber. The Wagners themselves did not do the work - they subcontracted to the Dinjans on the same terms as the primary contract TPFH demanded there be an increase in the amount of work done and varied their contract with the Wagners for this to be achieved. Wagners told the Dinjans that they had to do more work, but that would have required extra shifts around the clock to complete. Dinjans could not perform that amount of work - should have asked them first before changing the primary contract Dinjan argued that the subcontract was unfair, harsh or contrary to the IRC. The Wagners terminated the contract when they found out The IRC found that the contract conditions were unfair and harsh and reinstated the original contract. It did not permit the Wagners to terminate the contract

Wagner had to argue that the IRC's power to review and vary contracts under s 127C(1)(b) was not within the corp power - Cth parliament could not enact such a law and vest such power in the IRC. Where the IRC makes an order under s 127C(1)(b), it is an invalid order JUDGMENT: Court held that the power under s 127C(1)(b) went too far, merely because contracts relating to the business of a constitutional corporation was not enough to invoke the corp power Very subtle distinction: o Minority held that s 127C(1)(b) was valid (Mason CJ, Gaudron & Deane JJ): As long as this provision "related to" the business of constitutional corporations meant "affected" the business of the corporation, it would be valid The words "relate to" were sufficiently ambiguous to allow them to read down the meaning to "affect" Ie the mere fact that the contract relates to the business of a corporation was not enough - must have some effect on the corporation Majority adopted 3 judgments o McHugh J leading judgment: The term related to was too ambiguous, but cannot be read down. A contract that "related to" the corporation could be something that did not necessarily affect the corporation The word "relate to" can cover both contracts that do affect the business of a corporation, but is so broad as to also cover contracts that relate to a corporation but dont affect its business A law with respect to s 51(xx) must, in legal or practical operation, have significance for the activities, functions, relationships or business of the corporation - mere reference is not enough (especially where the law regulates natural persons) o Brennan J: A law with respect to constitutional corporations must have a differential effect on constitutional corporations - must discriminate, in its operation, between corps and other persons A law with respect to things "relating" to corporations is valid under s 51(xx) only if it affects constitutional corporations in a discriminatory manner Applies chiefly where the law applies to constitutional corporations and other persons indifferently o The ratio of the majority position is s 127C(1)(b) had to be changed from "related to" to "affected" in order to be valid The difference between the majority and minority is not the principle, but that the minority believed the words "related to" could be read down to "affected" This means that s 127C(1)(b) can regulate contracts that affect the business of a constitutional corporation

Work Choices Case (2006) (leading case) FACTS: What the Cth tried to do was to control industrial relations throughout the Commonwealth by reliance on the corp power. The relationship between a company and its employees will always affect its business, and accordingly, the Cth can regulate industrial relations throughout Australia o This is not novel - plaintiffs in the Industrial Relations Act Case conceded that s 51(xx) empowered Parliament to make laws governing the industrial rights and obligations of constitutional corporations

The industrial relations were regulated, but to such an extent that the Cth took over the industrial relations field and made inoperative the States' industrial relations laws for inconsistency The Cth took over industrial relations field on the corp power rather than the Industrial Relations power s51(xxxv). The corp power gave a greater scope of power than the industrial relations power in this regard The irony of the situation was that the corp power enabled this to be done because of the constitutional interpretation of those judges who had a centralist view of the constitution (favouring federal power). These judges did a lot to build up the corporations power for the Labor Governments, but the expanded power ended up being used by the Liberal party Why was it that these judges were quite happy in expanding the power, knowing that the other side of politics could also use the power? It was thought by these judges that the Liberal party would be favourable of States rights, and would not use the expanded Cth powers to undermine States' rights Were these laws constitutionally valid? Plaintiffs made three submissions: 1. S 51(xx) permits the making of a law with respect to only the external relationships of constitutional corporations, not internal (employee) relationships 2. Insufficient for a law to be characterised as a law with respect to constitutional corporations that the law confers rights or imposes obligations upon them 3. S 51(xx) should be confined in its operation by reference to s 51(xxxv) JUDGMENT: HCA held the Act was valid because it only applied when the employer was a constitutional corporation Majority (Gleeson CJ, Gummow, Hayne, Heydon, Crennan JJ) adopted what Gaudron J said: o See note 5 on p 236 - passage that majority referred to as the correct statement of the law here "I have no doubt that the power conferred by s51(xx) extends to the regulation of activities, functions, relationships and business of the corporation described in s 51(xx), the creation of rights, and privileges belonging to such corporations, the imposition of obligations on it and, in respect of those matters, to the regulation of the conduct of those through whom it acts, its agents, employees and shareholders and also the regulation of those whose conduct is or is capable of affecting its activities, functions, relationships or business." Gaudron J in Re Pacific Coal Gaudron J in Re Dingjan: Power conferred by s 51(xx) extends at the very least to business functions and activities of constitutional corporations and to their business relationships It follows that the power also extends to the persons by and through whom corporations carry out those functions and activities and with whom they enter into those relationships o The majority did not even cite McHugh J's judgment in Dinjan o Following this case, it seems that a position even wider than the broad view has been accepted o The most that could be said now is that in subsequent cases, the High Court may reign in this power slightly Submission 1 rejected because nothing in the Constitution indicates that s 51(xx) is limited to laws with respect to external relationships Submission 2 was argued around the distinctive character/discriminatory operation test proposed by Brennan J in Re Dingjan. This was rejected because the Work Choices Act either

singled out constitutional corporations (discriminatory operation) or protected them from conduct likely to cause loss or damage (Fontana Films) Callinan J dissented because he was a strongly States-rights judge Kirby J dissented: o For 100 years, Cth has tried to regulate industrial relations under the Conciliation and Arbitration Act. Surely, this (s51(xxxv)) was the power that the framers intended be used for industrial relations. Hence it was a limited power - needed to have an interstate dispute to be arbitrated. Because there was a specific requirement in s 51(xxxv), when you read the corporations power you have to read it as excluding industrial relations. This decision basically scrapped 100 years of case law on s 51(xxxv) The difficulty with Kirby J's argument is that he is the least likely judge to have dissented - he is objecting to the merits of the law rather than giving a sincere dissent. Another difficulty is that s 51 powers are subject to the constitution, but nothing indicates that each power is subject to another. The spheres of operation of each power can overlap o Gleeson CJ: if s 51(xx) is not affected by limitations in s 51(i), why affected by limitations in s 51(xxxv)? Work Choices is the ultimate triumph of the Engineer's case - read the powers to their complete fullness without any reservations (to State powers or other s 51 powers) Following Work Choices, there are two things holding back the Cth: o Politics - the Cth will only use the power if they believe strongly enough in it o Pure ignorance - the Cth government doesn't know the full extent of power that it has To what extent does the Australian federation still exist? More and more state powers are being shifted to the Cth

Incidental power The incidental power to s 51(xx) only makes a cameo appearance because the direct power is so broad Two contexts: power to regulate individuals who are implicated in the activities of a s 51(xx) corporation, and the power to regulate the holding company of a s 51(xx) corporation Fencot v Muller FACTS: TPA said that any person who suffered loss as a result of a corporation's misleading or deceptive conduct could sue to recover that loss from any natural person involved in the deception JUDGMENT: Held valid under incidental power because it was regulating the activity of the person who is involved in the corporation's deception It was felt that in order to make effective the prevention of deceptive conduct by corporations, it was necessary to control and punish the activity of those responsible for them Once accepted that s 51(xx) extends to the regulation of trading activities of trading corporations, it necessarily follows that in some circumstances, the power must extend to the imposition of duties on natural persons o Corporations act through natural persons o In order to be effective, regulation of activities of corporations requires imposition of duties on natural persons who participate in those corporate activities The civil liability imposed must be rasonably adapted to secure obedience to the regulation On the matter of definition of constitutional corporation, the majority held that Oakland was a trading and financial corporation even though it had not yet engaged in trading activities (it was "on the shelf"). The majority looked to the corporation's constitution, including its objects,

which revealed that it was established to engage in financial activities and to carry on a large variety of businesses Gibbs CJ dissented: memorandum of association and constitution alone are inadequate and misleading

Definition of constitutional corporation There are only three types of corporations that are constitutional corporations: foreign, trading and financial. Foreign corporation is any corporation that is incorporated under foreign laws, operating in Australia. How do we determine whether a company is a trading or financial corporation? "Trading" is the provision of goods and services for profit. (Must be sufficiently substantial) Two competing tests: 1. Dominant purpose test - look at the dominant purpose the corporation was formed in the first place 2. Current activities test - look at the current business activities of the corporation The dominant purpose test would limit the number of trading and financial corporations, because many corporations start small or with another purpose. Eg Manchester United started as a sporting club and is now a trading corporation. If applying the current activities test, it cannot be denied that ManU is a trading corporation. The Queen v Adamson (in the State superannuation board case p 283) FACTS: Involved West Perth football club and the relevant AFL clubs in that State The issue was whether they were trading corporations so that they could be regulated In a sense, they were trading corporations because they were selling their rights, advertising, selling souvenirs and making profits If a club is just a local children's club that holds a fete every year to keep the club alive, it would not be substantial enough to amount to a trading corporation JUDGMENT: Held 4:3 that these football clubs were trading corporations, applying the current activities test The substantial amount of their activities had to be trading activities for a corporation to be a trading corporation. The threshold is a very low threshold - not insubstantial amount of trading activities o Court looked beyond the "predominant and characteristic activity" - predominantly a sporting club, but engaged in not insubstantial trading activity The minority took the dominant purpose test E v Red Cross Issue whether RPA hospital was a trading corporation RPA received $18 million from the sale of medical services

This was held by the court to be sufficiently substantial to render it a trading corporation, even though it was not enough money to sustain the hospital on its own - still required government funding

Universities may also be considered trading corporations because they charge tuition fees. Superannuation case (1982) The Board was responsible for the superannuation of Vic public servants and the management of super funds Merely managing funds provided by employees does not make it a financial corporation The board invested large sums of money in property and purchases etc and it was not insubstantial. This caused it to be held as a financial corporation Current activities test applied liberally The only thing that the Cth cannot regulate is the actual incorporation of a company. Incorporation Case 1990 The s 51(xx) power refers to corporations that have already been formed before they can be regulated, thus Cth cannot regulate the incorporation of a company Constitutional interpretation - consider constitutional text, the intention of the framers, precedent and policy If Cth could incorporate corporations under s 51(xx), it could empower them to engage in activities otherwise not within Cth power, eg engage in purely intrastate trade (Western Australia Airlines Case, no power under s 51(i))

Week 9 - Freedom of Interstate trade

S 92 Constitution S 92 - on the imposition of uniform duties and customs, trade and intercourse amongst the states, whether by means of internal carriage or ocean navigation, shall be absolutely free. Critical words "trade, commerce and intercourse amongst the states shall be absolutely free". Intercourse - not necessarily for trade or profit. This has been interpreted by some people as an absolute guarantee of laissez faire economics/free market economy. It could be interpreted as a constitutional guarantee of free market economy - if any Parliament attempts to create a system that restricts free market, it could be struck down for being unconstitutional. Such a prohibition does not exist in the UK. After WW2, there was the creation of a welfare state. Opponents to such activity could not go to the court and argue unconstitutionality. Three leading cases: Cole v Whitfield, Bath v Alston Holdings, Castlemaine Toohey Before Cole v Whitfield, the jurisprudence on s 92 was all over the place - extremely difficult to apply s 92. Problems with s 92 "Absolutely free" This phrase does not indicate from what trade and commerce is to be absolutely free from. The next question is what does free mean? What does absolutely mean? Does it mean absolutely no restraint whatsoever? After Engineers, courts focused only on the text and did not refer to extraneous factors, such as what the framers intended. Two views emerging: 1. Complete philosophy of laissez faire individualism and free market economy - absolute guarantee of freedom from government interference and regulation when it came to interstate economic matters. 2. A freedom from trade barriers between the states - simply creating a free market in Australia The framers of the Constitution intended for s 92 to crate a free market in Australia. As the century progressed (post-Engineers), there was an increasing influence of totalitarianism and communism. As these ideas developed and began threatening Australia, the broad view began to take hold - that s 92 was a constitutional guarantee of free market economy and laissez faire individualism. Bank Nationalisation Case (p 506) At the centre of the case was an attempt by the ALP to centralise non-government banks

S 68 of the Banking Act abolished all banking activity except that conducted by the Commonwealth Bank o Government policy, through determining who gets a loan and who doesnt, may shape the economic development of the nation This case called forth the very top echelons of the Bar and the court Evatt's argument: o Banking Act valid because s 92 only prohibits the creation of custom barriers at State borders - not a guarantee of free market economy o Just because all banking is vested with the Commonwealth Bank does not mean that banking cannot go on Barwick's argument: o Made a plea for the laisse faire and economic freedom argument in s92 What the High Court did was apply strict textualism - best interpretation of the Constitution without outside influence. However, applied too purely results in a situation like that of s 92

Following this case, there was an appeal to the Privy Council. The PC upheld the decision and confirmed that any legislative prohibition on interstate trade, commerce and intercourse was itself prohibited, but it did allow for some regulation of interstate commerce where it would enhance such trade and commerce. This exception is what caused all the difficulties with s 92 until Cole. Uebergang v AWB (1992) All wheat growers had to deliver their wheat to the AWB, which controlled the marketing of wheat so as to stabilise and equalise the price of wheat - effectively a monopoly Barwick CJ took the extreme laisse faire view of s 92 which left very little room for any type of government regulation o "...the total prohibition or denial of the participation of the individual in interstate trade, commerce or intercourse necessarily contravenes [s 92]" o Trade, commerce and intercourse, include that carried out by individuals, should remain absolutely free Murphy J took the opposite view (perhaps did not want to see s 92 undermine Labor party policy) In between these two was an array of views Gibbs - a balance which favoured freedom for the individual citizen "in the absence of compelling considerations to the contrary" Stephen & Mason J - they will allow restrictive regulation as long as it is no more restrictive than is reasonable in the circumstances with due regard to the public interest Aickin J - accepted the PC's comment. Any exceptions allowing for regulation would be rare and indeed exceptional The case was sent away without being decided Cole v Whitfield (1988) FACTS: Whitfield was a seller of crayfish - purchased live crayfish from SA which were above the minimum size, but when brought to Tasmania to sell, they were below the minimum size permitted in Tasmania. These minimum size requirements are to protect the crayfish industries in particular States Whitfield charged for being in possession of undersized crayfish Argued that there was a breach of s 92 - the difference in minimum sizes meant that Whitfield could not import from SA crayfish of a particular size to sell in Tas. This was then a burden on SA trade in crayfish in favour of local Tas trade - both discriminatory and protectionist JUDGMENT:

Instead of applying existing s 92 decisions, the court decided to come other and make enough compromises to come to one conclusive decision o The court was only able to come together because both Barwick and Murphy had gone The position is this: (p 514 last para and p 519 2nd para) o It is possible in cases such as this to look at the discussion of the framers of the Constitution - s 92 was simply for the creation of a free market in Australia by getting rid of artificial barriers between States o S 92 prohibits discriminatory protectionism First, must establish that there is discrimination against interstate trade This discrimination must be for protectionist purposes - fostering intrastate trade to the detriment of interstate trade o S 92 is more than just a prohibition on formal custom barriers. Any measure which is protectionist in a discriminatory sense is prohibited o When talking about discrimination, it can either be discrimination on the face of the law (clear from statute) or discriminatory de facto - as a matter of the operation of the law o In terms of protectionism, the same thing applies - can either be in the purpose of the statute or protectionist in effect, even if not intentional The expression "free trade" signified an absence of protectionism - tariffs, quotas, differential rates, subsidies etc o S 92 prohibits the imposition of protectionist burdens, whether fiscal or non-fiscal, which discriminate against interstate trade and commerce o Freedom of interstate intercourse, read out of its historical context, might suggest that interstate trade and commerce must also be left without any restriction or regulatory burden - this would result in anarchy o "Absolutely free" is unqualified and read in the abstract is a guarantee of anarchy. Its operation must be explained by reference to political expediency, not by reference to a purpose of prohibiting all legal burdens, restrictions, controls or standards o S 92 is not confined to discriminatory fiscal charges - protection against interstate trade and commerce can also be achieved through non-fiscal measures o S 51(i) and s 92 sit easily together only if s 92 is construed as precluding particular types of burdens, ie discriminatory burdens of a protectionist kind. S 51(i) cannot be deprived of its essential content For State laws, a law applying to all trade and commerce, both interstate and intrastate, is less likely to be protectionist than if there is discrimination between interstate and intrastate operation. However, if such law in effect/substance discriminates in favour of intrastate trade, it will be invalid if it is also of a protectionist character o A law with the object of prescribing a standard for a product or service or a norm of commercial conduct is not normally for protectionist purposes There was in fact no breach of s 92 Differences in limited crayfish size were discriminatory, but really no protectionism - it was set to protect the local crayfish population. Each state would set its own limits to ensure the survival of its crayfish population o However, applying the protectionism test strictly, it is protectionist in its effect, even though it is unintentional o Court took the common sense approach Court did not just look at the form, but also at the substance of the legislation By his influence, Mason CJ took the court away from a formalistic approach and required the court to look at substance as well as form - historically, many protectionist statutes were disguised as for serving other purposes This decision was approved by everyone as a reasonable and sensible decision and remains good law till today

The rule in Cole can still be difficult in application. Bath v Alston Holdings (1988) FACTS: The relevant statute was a VIC statute - Business Franchise Tobacco Act 1974 (VIC) which required a person who sold tobacco at a retail level to obtain a licence - imposed a licence fee which was $10 flat and $50 a month for the period of the licence, but in addition also had to pay an amount equal to 25% of the value of the tobacco o Exemption - this 25% ad valorem did not have to be calculated on tobacco which was purchased from a VIC wholesaler VIC wholesalers had a licence fee of 25% of the value of the tobacco that was sold, irrespective of where it came from. This 25% is passed on to the retailer in terms of price, so in the end of the day the retailer is still paying 25% of the value of tobacco bought, either on their licence fee or to the VIC retailer o The consumer is affected the same way - 25% price increase regardless of where the tobacco came from The argument was put that this was not a breach of s 92, because the whole purpose of the VIC legislation was to create a level playing field, and that it was easier to just collect tax from wholesaler because there were fewer of them than retailers of tobacco JUDGMENT: Majority (Mason CJ, Brennan, Deane and Gaudron JJ): Held that there was a breach of s 92 The minority did not take into account the wholesale taxes of other states. If there was a 25% wholesale licence in NSW as well, and VIC retailer buys tobacco from NSW, they are in effect paying 25+25=50% more. If purchased from VIC wholesaler, the retailer only gets hit by 25% price hike Irrespective of what the tax of other states were, there is still a breach of s 92 because what the Act does is to undercut the competitive advantage of other states - if NSW had 0% tax, then a VIC retailer should be able to acquire tobacco for cheaper than from VIC wholesalers, but because of the 25% extra licence fee, this competitive advantage of NSW has been removed The fact that interstate and local tobacco was treated differently at the retail level was discriminator. The fact that it took away a competitive advantage or worsened a competitive disadvantage is enough to breach s 92 If the tax is imposed on a transaction in the chain of distribution of goods, the relevant inquiry is whether the tax is imposed only on transactions where the goods have come from/go to another State or whether the tax is imposed on all transactions without differentiation based on location Minority (Wilson, Dawson and Toohey JJ): Held that there was no breach of s 92 because the Act just created a level playing field Castlemaine Tooheys FACTS: Tooheys brewed beer in QLS, NSW and WA but sold in all states SA statute Beverage Container Act 1975 - purpose of original Act was environmental - imposed a deposit on certain containers which was repaid after being returned to where it was bought Exemptions: o Did not have to pay 5c deposit on refillable bottles o It was these bottles that were used by SA brewers - local brewers got an advantage The plaintiff used non-refillable bottles and were thus subject to 5c deposit

At this stage, the Court held that there was no real competitive advantage - the 5c per bottle was not enough to create a significant advantage. The non-refillable bottles market share was only 1.5% of SA bottle sales In 1986, Tooheys commenced on a vigorous marketing strategy to increase market share to 10% of Australia. The expense came at the local SA brewers SA passed amendment of the Act - the amount of deposit on non-refillable bottles was increased to 15c while the deposit for refillable bottles was 4c The Court accepted that this change in the law made Tooheys' non competitive - the price differential was too great and produced protectionist effects The new provisions also required the retailer refund the deposit, but only for non-refillable bottles. For refillable bottles, these could be taken back to a depot for refunding. This was also regarded as creating an advantage JUDGMENT: The natural result of these measures was that interstate brewers would be at a disadvantage because local retailers would not be inclined to buy their productions (due to having to refund the deposit) The practical effect of the 1986 amendment was to prevent Tooheys from increasing its market share in SA The argument that Tooheys could just change to refillable bottles was rejected because evidence was adduced that it was economically infeasible Accidentally is there discrimination? Simply because the SA brewers use a particular bottle that is treated more favourably. Too accidental to be discriminatory in the relevant sense SA government said that it had no intention of protecting local industry and discriminating against interstate brewers - the whole purpose was for environmental factors and litter control. The reason for the high deposit was to ensure the return of the non-glass, nonrefillable bottles. Also wanted to promote energy and resource conservation through refillable bottles. Any protectionist result would be incidental to the main purpose of protecting the environment Court held that there was no discrimination on the face of the statute. BUT there was de facto discrimination in that the interstate bottles were being discriminated against There was protectionism because it was giving an advantage to SA beer Exception - if you can show that the reason for your legislation is for a legitimate nonprotectionist end, even though it ends up being protectionist, it will not be in breach of s 92 Court accepted that the SA government was legitimately concerned with environmental considerations, but what they came up with was incidentally protectionist. However, this was not relevantly protectionist in terms of s 92, and was thus not a breach of s92 o This only applied to the 1975 version of the Act, not the amended version If you have a legitimate non protectionist end, the law produced from this will be valid even if it fails the Cole test and the law is reasonably appropriate and adapted to that end The original 5c differential was reasonably appropriate and adapted to achieving environmental protection. However, the 1986 amendment created too much of a differential to be reasonably appropriate and adapted to achieving environmental protection Subtext - the HCA really thought that the purpose of the 1986 amendment was to create a protectionist fee

The fact that a law regulates interstate and intrastate trade evenly by imposing a prohibition or requirement without discriminating location suggests that the law is not protectionist Where a law prima facie secures a legitimate object but its effect is to impose a discriminatory burden upon interstate trade, the existence of a reasonable non-discriminatory alternative for securing the legitimate object suggests that the purpose of the impugned law is not to achieve that object but to impose discriminatory protection

If the imposition of a burden was necessary or appropriate and adapted to the protection of the people of the State from real danger or threat to its well-being, the law might not breach s 92 o However, "necessary" requires court to answer a political question If legislature had rational and legitimate grounds for apprehending a legitimate problem, legislation which is appropriate and adapted to the resolution of the problem would be consistent with s 92 so long as any burden imposed on interstate trade was incidental and not disproportionate to their achievement

What is becoming blatantly clear from the past few cases is that the court is not entirely satisfied with any outcome so far. When trying to apply legal conceptions to what are economic facts, it doesnt always come out well. Barley Marketing Board (NSW) v Norman (1990) Barley Marketing Board set up to take control of all NSW-produced barley and to use its bargaining power to secure higher prices for all NSW producers Court held that the legislation establishing this board was protectionist, but did not discriminate between interstate and intrastate trade o Maltsters from NSW and VIC both bought barley from the Board in the same way at the same price, and they could also buy barley from VIC or any other state at the market price - thus no discrimination APLA Ltd v Legal Services Commissioner (NSW) (2005) FACTS: Pt 14 of the Legal Profession Regulation 2002 (NSW) prohibited advertising by lawyer of legal services in relation to personal injury claims. APLA argued this infringed on freedom of interstate intercourse Court did not decide whether the provision of legal services amounted to trade and commerce This case is significant for the test applied in the case of an activity which constituted interstate intercourse but not trade and commerce JUDGMENT: Gleeson CJ and Heydon J: Communication is intercourse Test applied: whether the impediment to such intercourse imposed by the regulations is greater than is reasonably required to achieve the object of the regulations o Object of regulations was to restrict advertising of legal services provided in NSW - can only be achieved by a general restriction on advertising - impediment no greater than is reasonably required

Week 10 - Taxation
Taxation power Taxation and Grants ss51(ii), 55, 96 S51(ii) provides that the Cth Parliament has power to make laws with respect to taxation but not to do so to discriminate between states or parts of states. There cannot be any taxation without Parliamentary authorisation. Preliminary issues @ 375 to 380 The Taxation power is under s51 of the Constitution, and therefore like the other s51 powers is subject to this Constitution. S51(xxxi) provides that if there is a compulsory acquisition of property, they must pay just terms. Tax is different to this because of the definition of taxation. Taxation is a special type of compulsory acquisition, and because it is very special in nature, it is not subject to s51(xxxi). There are other provisions in the Constitution which are closely related with the taxation power including ss53, 54 and 55. S53: Any law which appropriates revenue or monies, or imposes tax, shall not originate in the Senate. This is important as it emphasises the fact that the bill is so important that it should go through the more democratically elected house. Senate is not as democratic as there is an equal number of Senators from each state. Demand a greater degree of scrutiny for these types of bills. S54: appropriation bills, which deal with the annual service of Government, shall only deal with appropriation and nothing else cannot be confused with nothing else. S55: Applies the same principle to s54. Laws imposing taxation shall deal with only the imposition of taxation and any provision therein dealing with any other matter shall be of no effect cannot tack on other provisions. Result is that you cannot hide your tax amidst other provisions. If you breach s55, the taxing provision remains valid, but everything else is invalid. S53-55 incorporates the lessons learnt in Britain from C17. Re Dymond (1959) "Dealing with the imposition of taxation" and "dealing with taxation" are different things. The former expression does not mean or include "dealing with matters incidental to the imposition of taxation" Provisions for administration and machinery, appointment and powers and duties of tax commissioner, making of returns and assessments, enforcement of liability, collection and recovery of tax and punishment of offences are distinct from the "imposition of taxation" Minority view: laws regulating the assessment, collection and recovery of tax dealt with the "imposition of taxation" Minority view in Re Dymond adopted by majority in the Mirror Taxes Case (2004). "Dealing with" should allow "the insertion of any provision which is fairly relevant or incidental to the imposition of a tax" Tacking is a different matter to the insertion in a taxing statute of provisions for the assessment, collection and recovery of that tax

Statutes that impose taxation can only do that and not other things. Provisions that impose tax cannot be tacked onto other statutes. If there are non-taxing provisions, they must go and only taxing provisions can stay. If it is an amending statute that imposes a tax on a non-taxing statute, it is invalid. This is contrary to the 2nd limb of s 55, which states that all non-taxation parts of the Act will be invalid. It is important to identify statutes that are imposing taxation. However, Parliament tends to do things to hide the fact that a provision is a tax. The difficulty is that there isn't a whole lot of cases on this matter. Air Caledonie v Commonwealth (1988) 1987 Amendment to the Migration Act including a fee for immigration clearance. This was payable every time that a person entered Australia, regardless whether they were Australian Citizens or not.

It must be noted that this was described as a fee for the service provided by Immigration clearance at customs barrier. It was argued that the fee was in fact a tax.

Issue: Was this a fee or a tax? Court

Definition of Tax in Matthews v Chicory Board: tax is a compulsory exaction of money by a public authority for public purposes enforceable by law and not a payment for services rendered (e.g. fee for service provided, privilege, or penalty) "not a payment for services rendered" is but an example of various special types of exaction which may not be taxes even though all 3 attributes mentioned by Latham CJ are present The High Court said that if you were coming back into a country, it is not a privilege to re-enter a country that is yours it is a right. If the fee applied only to non-citizens, it might have been arguable that it was not a tax The Court held that if you were an Australian citizen who is being charged a cost upon reentry, it should be regarded as a tax. Under no circumstances could it be seen as a fee for a service when it applied to an Australian citizen. All 3 attributes of the test are met - consider whether there was something special about the fee or the circumstances which might preclude its characterisation as taxation - none present Parliament can call the tax whatever it likes. If it is in substance a tax, it is a tax the terminology is irrelevant. If you apply s55 strictly, the Constitution would have to invalidate the whole of the Migration Act and only the taxation provision stands. However, since the section was inserted by an amending act, the amending statute was struck down. This is technically incorrect, as the amending statute is part of the original post-amendment. The HC has taken a pragmatic/policy approach here. Definition from the Matthews Case was not an exhaustive definition Tax is not by way of penalty - MacCormick v Federal Commissioner of Taxation (1984) Tax is not arbitrary - Deputy Federal Commissioner of Taxation v Truhold Benefit (1985) There is no reason why a tax should not take a form other than money can be taxed on things other than money.

It can still be a tax even though it is collected by a non-public authority for purposes which are not strictly public, as long as it is justified or authorised under a statute. This comment was taken up, and actually became good law problem relating to Roman era taxation

Australian Tape Manufacturers Association v Commonwealth (1993) Facts

There was an amendment to the Copyright Act. What the amendment was hoping to do was to compensate copyright owners for the private and domestic takings of sound recordings. So long as you tape things from the television at home at private premises for private and domestic use, it was no longer illegal. However, by making it legal, you still need to compensate the copyright holders. Imposed a royalty on the sale of blank tapes to record these things. The money was used to compensate copyright holders across the board. What the Cth did in its amendment to the Copyright Act was that the money was not paid to the Cth, but rather paid to a collecting society (private company) which would eventually distribute the royalties collected for the relevant copyright owners. Hypothetical how could the tape owners argue against this? If it is a tax, then the amending act will fail. If you could argue that it was imposing tax (the amendment), the argument is pursuant to Air Caledonie is that the whole thing goes. Would have relied on the comments made by the HC in obiter dicta. Cth would be arguing that it was not a tax, but a royalty. What is actually being done is compensation of copyright owners it is simply a methodology to deal with a particularly complex situation. Argument was made that it could be a tax whether or not it is collected by a public authority, and whether it was paid to government funds. This argument was founded on the dicta in the Air Caledonie case.


Was held that this was in fact a tax, and that it breached s55 Majority of Mason, Brennan, Deane and Gaudron JJ. Can still be a tax even though it was not collected by a public body and spent by private hands. No Australian authority supports the converse proposition that an exaction is not a tax if it is not paid into Consolidated Revenue - s 81 cannot constitute a criterion for what is a tax Money raised by a tax levied would not cease to be "revenues or moneys raised by the Executive" simply because it is paid directly to a particular group in the community. Such a law will not cease to be a law "imposing taxation" This levy was not a royalty because ordinary royalties (mining, patent etc) are payments made in respect of the exercise of a right granted. Vendor receives no right, benefit or advantage for payment of tape levy Nor is the payment made in consideration of the grant of a right to copy copyright work Majority held that compensation of copyright owners as a matter of public importance was a public purpose Dawson, Toohey and McHugh dissented (persuasive minority). Minority argument was that s81 of the Constitution said that all revenues and monies received by the executive government shall form one consolidated revenue fund to be appropriated for the purposes of the Commonwealth and the monies can only be utilised when Parliament approves that the money can be spent. The consolidated revenue fund is to be used for the public good, not private purposes.

The levy was imposed in lieu of a royalty for the same purpose of compensating copyright owners for the use of their copyright material Compulsory exaction of money under statutory authority alone is not sufficient to constitute tax, otherwise any compulsory transfer of money under statute would be a tax Minority argument if we say that the royalty is going to consolidated copyright owners, how can this be a tax? If you are saying that this is a tax, you are breaching s81 of the Constitution as you are putting the monies into private hands before they are going into the consolidated revenue fund by way of Act of Parliament. Because of the seriousness of the principle, Parliament could not have intended this to be a tax, and s81 of the constitution also restricts this. If it is a tax, it will fail, because you are not putting it in consolidated revenue.

The effect of Australian Tape Manufacturers is that a compulsory exaction will prima facie constitute a tax unless it falls within one of the alternatives to taxation, eg penalty, fee for service, royalty etc. If it is not possible to relate the revenue amount to the services that is being provided by those funds, then it is a clear indicator of a tax. Harper v Minister for Sea Fisheries (1989) An excise is a tax on goods The HCA's decision in this case can be generalised to apply to tax S 90 of the Constitution makes excise tax exclusive to the Commonwealth. If any State government tries to raise a tax on goods, it will be invalid FACTS: A Tas statute imposed a licence fee for the right to take abalone from State fishing waters. The licence fee was set at a very high figure - could not relate it to the cost to the Tas government in regulating this industry Usually a licence fee will be a licence fee when it raises a sum of money that is then used to regulate/manage the thing for which the licence is for. There is usually no spare revenue to go into the treasury This licence fee was a revenue raising measure - compulsory exaction of money JUDGMENT: HCA held that it was not a tax, even though the rate was so high That which is not a tax cannot then be an excise Abalone in Tas is a very limited natural resource, and is liable to damage, exhaustion or destruction by uncontrolled exploitation by the public The HCA held that the reason for the high fee was to limit the number of people who could engage in abalone fishing, to a level that could ensure the protection of this resource This rational reason rendered the fee a licence fee rather than a tax Question: does this only apply to limited natural resources, or to something else? What about limited cultural resources (eg aboriginal art). If you can find a rational reason for why the fee is extremely high, way beyond that required by the regulation/legislation, and is not revenue raising, there is nothing stopping you from putting this to the court. Air Services Australia v Canadian Airlines International (2000) FACTS:

The relevant Act was the Civil Aviation Act 1988 which set up the Civil Aviation Authority, which was a regulatory agency and it was set up to perform a regulatory function in the airline industry particularly relating to safety Under the Act, the CAA is authorised to fix charges for the various services or facilities that it provided - the airlines had to pay for the use of particular services S 67 provided that the amount or rate of the charge for the services should be reasonably related to the expenses incurred by the CAA in providing the service o Worded to sincerely try to ensure that they are providing a service, and not imposing a tax S 67 also included 'the charge shall not be such to amount to taxation' o This sentence is brilliant because it expressly states that this provision is not to impose a tax. If a fee was imposed and considered a tax, the decision to impose the charge is quashed for being ultra vires of the Act. This protects the Act itself from being made invalid for containing taxation provisions It is clearly the intention of Parliament to not impose a tax - they are not trying to hide a tax behind a faade S 69 of the Act granted a statutory lien over unpaid charges over aircraft o Lien is a very precise title to goods, eg the mechanic can hold on to your car after doing repairs if you do not pay for the repairs, and has a right to ownership to the vehicle until you pay. The right to sell only arises after a reasonable time S 72 authorised seizure of aircraft for unpaid monies S 73 authorised the sale of aircraft if the outstanding amount remained unpaid for 9 months This right stands against the world and the owner of the aircraft What happened here was that Compass Airlines was operating a domestic service and went into liquidation and they were owing the CAA for substantial amounts of money for a number of charges. CAA invoked statutory lien on aircraft used by Compass. The problem was that Compass didnt own the aircraft - they were leased from Canadian Airlines. This lien was good against the world, even against lessee/lessors CA argued that this was a tax, there was an issue regarding validity of the Act - can those provisions stand without the rest of the Act? If that part of the Act that sets up CAA goes, then CAA itself doesnt exist If big operator, the charges were commensurate to the usage. The smaller the airline operator (like Compass), there was an increasingly disproportionate charge. The argument was that this was so disproportionate that it was in fact a tax CA argued that the charges were not reasonably proportionate to the expenses - there was no discernable relationship between the amount paid to Air Services and the value of the services received by Compass The CAA lawyers brought expert evidence into court - got economists to show that CAA's method for calculating fees was the most efficient method and took into account the accounting concept of "network" - took into account Ramsay economic pricing principles o What the CAA was trying to show was that yes there was a discrepancy, but it was due to the nature of the services it provided, and it was the most efficient method of charging based on economic principles. The unfortunate consequence is that less frequent users do not get the same value as large operators JUDGMENT: HCA held that since this was a rational explanation, it remained a fee for services and not a tax This evidence was not challenged, but may have led to different outcome if it was challenged Even though prima facie there is a discrepancy in the amount paid and the value received, so long as the amount paid fairly reflects a bona fide attempt by the provider of the service to recover costs across the whole spectrum of users, it will remain a fee for services and not a tax McHugh J:

The fee, being a compulsory exaction, is prima facie a tax. However, per Gibbs J in General Practitioners Society v Commonwealth (1980), the fact that the fee is compulsory "does not in my opinion alter the character of the fee or convert it into a tax" Seems to be a shift in determining whether a fee for services is taxation from cost to value. Harper focused on value of abalone taken in determining licence fee rather than the cost of administering the licence scheme o There should be a discernable relationship between the value of the service provided and the rate of fee Where no discernable relationship, easier to infer a revenue-raising purpose behind the exaction o In Air Caledonie and Northern Suburbs, fees were taxes because no service could be identified Gleeson CJ: Revenue raising objective is a significant but not necessarily determinative feature of a law with respect to tax Query if the result was have been the same if accounting evidence was not brought to the court. Lutton v Lessels (2002) FACTS: The Child Support Act 1989 and related Acts established a scheme for the registration of liabilities to make child maintenance payments The Cth was given the authority to recover unpaid maintenance by bringing the recalcitrant (father) to court The Cth, once they received the money, had to return the amount of unpaid maintenance liabilities to the (mothers) This whole system was challenged on the basis that it was a tax JUDGMENT: This scheme was only substituting a creditor for a trustee, who must then give the money back to the creditor The Cth is collecting an existing debt, not a new debt therefore it was not a tax o The substitution of a new obligation to the Cth equal to an existing obligation to a private person takes this compulsory exaction outside the description of taxation If the Cth had collected the money to put into a fund to generally compensate mothers, or went into consolidated revenue for the benefit of the Cth, then it would be a tax o Proceeds paid into Consolidated Revenue is not necessarily tax (follows from what was stated in Australian Tape Manufacturers. Also see s 53)

The taxing power (s 51(2)) enables the Cth to make laws with respect to taxation (not necessarily imposing taxation). When talking about "with respect to taxation", it is not just about tax. Can government use taxation power to impose tax not to collect money, but to discourage an activity? King v Barger (1908) FACTS: The Excise Tariff Act imposed excise duties on certain types of agricultural machinery, but manufacturers were exempted from that tax if the employment conditions in the factory satisfied the specific conditions relating to wages that had been declared by Cth industrial award or the president of the Conciliation and Arbitration Court

The Cth commenced proceedings against Barger, who was manufacturing agricultural machinery without a licence and without paying the duty Barger argued that the Act was not a law with respect to taxation, but a law with respect to maintaining certain employment conditions in the agricultural machinery industry The dominant characterisation of this statute was to exempt someone from tax if they met certain employment conditions in their factory If this was the dominant characterisation the law would be invalid. However, today, due to Fairfax, there may be dual characterisation and it may be characterised as being with respect to taxation Back then, it meant that the Cth could not use the taxation power as an incentive or disincentive to certain activities o One way for the Cth to get power over something that isn't in s 51 is to use the taxation power to create incentives or disincentives JUDGMENT: Power of taxation intended to be something entirely distinct from a power to directly regulate domestic affairs of the States. Cannot indirectly regulated State affairs either because of s 107 Majority held the Act was not in substance an exercise of taxation power Isaacs J (dissenting): taxation power is a plenary power subject only to express limitations Fairfax v Federal Commissioner of Taxation (1965) In Fairfax, the Cth statute provided an exemption to income earned by super funds on the condition that a certain % of their funds were invested in government bonds. The dominant characterisation was to encourage super funds to invest in government bonds. However, because tax liabilities were being affected, the statute could also be characterised as with respect to taxation JUDGMENT: Ratio: a statute does not cease to be with respect to taxation merely because it regulates, discourages or even definitively deters the activity being taxed Kitto J: substance of the Act is the obligation which it imposes - to pay income tax. Therefore, in substance and in form, the Act is a law with respect to taxation Barwick CJ in Fairfax (p 418) - it is possible that a law which increases or decreases the extent of a liability to pay tax may in some circumstances be held as a law that is not with respect to taxation (Barwick does not give examples of such circumstances) Menzies J (p 419) - an example is a special prohibitive tax on the income derived from the sale of heroin or from growing poppies for the production of heroin may in form be a tax law but in substance, it is a law to stop the drug trade o However, the problem with this example (and what Barwick CJ has said) is that it is difficult to reconcile this with what Kitto J has said, or what Fairfax establishes The emphasis in Fairfax was that the taxing power is non-purposive and the HC has, in subsequent cases, quashed what Menzies J has said (note 2 p 419, State Chamber of Commerce and Industry v Cth). SCCI v Cth In order to attract high level employees to firms, a lot of fringe benefits were provided. Because they were not income, they were not taxable The Cth passed a law which imposed a tax on fringe benefits Argument that the tax was not to raise revenue but to provide disincentive to the use of fringe benefits High Court rejected this argument

Northern Suburbs General Cemetary Trust v Cth The relevant Act provided for the minimum amount that an employer had to spend to train its employees If the employer did not meet that sum of money, it had to pay the difference to the government. Once it got into Cth hands, it wasnt returned back to the employer, but it went to a common fund that was then used to provide Cth training centres for young employees Employer argued that the law was not with respect to taxation and was in fact a fee for services because the money was not going back to the employer JUDGMENT: The majority held that it was a law with respect to taxation The fact that the revenue raising burden is secondary to the attainment of some other object is not reason for treating the charge otherwise than as a tax Dawson J: This was not a fee for services - the connection between the fee and the trainer provided from the fund was too tenuous to characterise it as a fee for services The Act clearly intended to raise revenue for the purpose of expenditure under the Government's training guarantee agreements MacCormick v FCT - for an impost to be a tax, must be possible to differentiate it from an arbitrary exaction

Week 11 - Grants
S 96 of Constitution During the first 10 years of the Cth and unless Parliament provides otherwise after 10 years, the Parliament may grant financial assistance to any state on such terms and conditions as the Parliament thinks fit. (p 441) The honest purpose of s 96 was to allow the Cth to help out any State that was in financial difficulty, because States were not relying on London any more. Problem - s 51(ii) says that the Cth cannot discriminate between States. The money of the grant comes from the consolidated revenues of the Cth, which comes from taxation revenue of all States. This grant could be used to get around the restriction against discrimination in s 51(ii). "...on any terms and conditions as Parliament thinks fit" Prima facie, this would allow the Cth to dictate where the money goes If Cth gives a grant to a State on conditions X Y and Z, does X Y and Z have to fall under s 51 powers? If not, then the Cth could use the grant power to regulate State matters or legislate on whatever it wants, as long as the State accepts the money Three (two) types of grants: 1. Specific purpose grants (eg for education, health, etc). If the State accepts the money, it must follow the conditions 2. General revenue grants (used to be given yearly to States that could not generate enough income on its own). This has been abolished since the GST, as each State gets back as much as was raised by it in GST First uniform tax case (1942) Prior to WW2, each State was involved in raising its own income tax. Different tax rates were set by the States This created competition between the States and tax levels were kept generally down - people could move to another state that taxed less. This created a lot of inefficiencies when the Cth was at war, particularly in 1942 when Australia's very existence was in issue. Cth decided that it could not wage the war efficiently unless it had control of income tax - States refused Cth tried to force the States' hand using the Constitution - developed a scheme that adopted a methodology where they combined s 51(ii) with s 96 to overcome the discrimination provision. This was important because if the Cth wanted to raise a tax above and beyond what the States were charging, it had to charge a tax equal across all States (otherwise it is discriminatory), but states with lower taxes would oppose this Cth introduced 4 statutes: o Income Tax Act 1942 - raised level of taxes to the total amount which was equal to that levied by the states in total plus the amount needed to run the war o States Grants Income Tax Reimbursement Act 1942 - provided that the Cth would give a grant to each state on condition that it did not impose its own income tax, but the amount of money given to that state would be the amount of income tax that it didnt collect - Cth kept the extra amount of tax o Income Tax Assessment Act 1942 s 221 required taxpayers to first discharge any Cth income tax debt before they discharge any liability for a state income tax Eg say a state decided to continue to collect income tax. The taxpayer would have to pay both Cth and State taxes, at high levels - must pay Cth first

Income Tax Wartime Arrangements Act 1942 - required states transfer to the Cth all state tax staff, officers, furniture and etc used to collect income tax The argument put by the States that this package of legislation must not be examined as separate Acts, but a total package the point of which to affect a discriminatory taxation system under the guise of using grants - collecting money equally and giving it back unequally JUDGMENT: HCA said that it must look at each of the provisions separately, not as a package Income Tax Act 1942 was with respect to s 51(ii), no discrimination, hence valid o Tax Act did not prohibit States from levying their own taxes (which is beyond Cth legislative power) Grants Act was under s 96, no requirement that there be no discrimination, hence valid. The condition that the States don't collect any income tax of their own is valid because it is 'any condition', and the Cth is not forcing the States to accept - they can reject it o The argument was put that even though there was no legal coercion, the political and economic coercion put on the States were quite serious - how can the taxpayer pay at this amount? How can taxpayers pay both taxes, especially the 2nd tax because the State refused to accept the Cth grant This argument was not accepted - the only way the HCA can decide a matter is according to the law. As long as theoretically there is no legal coercion, the law is valid Cth may induce State to exercise its powers or abstain from exercising through the use of grants o Raising money to pay to the States is a proper Cth purpose Income Tax Assessment Act s 221 o One judge said it was valid under defence power in times of war o Majority said it was an exercise of the incidental power under s 51(ii), hence it was valid Income Tax Wartime Arrangements Act was upheld by the majority under the defence power, because it was only during times of war The validity of legislation is not determined by the motives or "ultimate end" of a statute The indirect effects of a law are irrelevant in determining the substance of the law. A high customs tariff that causes State business enterprises to close down is not a law with respect to those enterprises; it is still a law with respect to taxation

Robert Menzies said that this case marked the end of the federal era - the decision undermined States' ability to impose income tax and collect its own revenue This case is the high water mark of the Engineer's doctrine of strict textualism Prof Kenneth Bailey - a Constitution that contains s 96 contains within itself the mechanisms of Cth supremacy

Second Uniform Tax case (1957) Income Tax Act itself still maintained a high level of tax throughout the Cth after the war had ended The Grants Act still prevailed The Income Tax Assessment Act was overturned by 4:3 decision - not an appropriate or necessary measure to warrant the use of incidental tax power o This is a federal tax; Cth does not need a priorities provision to ensure that it receives its tax Dixon CJ (regarded as the greatest common law lawyer in 20th century in the world) Felt that s 96 had been given too liberal an interpretation - more limits should be imposed upon it, possibly the condition of the tax had to be sufficiently related to federal issues

Restrictions could only be implied from some conception of the purpose for which the power was conferred upon Parliament or from some general constitutional limitations But also felt constrained by precedent - the Court has placed no limitation upon the terms or conditions that could be imposed under s 96 S 96 is confined to the granting of money and of granting money to the State governments Confirmed that nothing in s 96 authorised the making of a coercive law The conditions that the states must fulfil to get the money must be within their constitutional competence o What if s 96 is used by the Cth to require the States to do something that is not within their Constitutional powers to do Eg the States cannot raise excise. What if the Cth Parliament set conditions which allowed States to collect excise? Also cannot give grants on condition of establishing a religion What Dixon is trying to point out is that there are limits to s 96 The Assessment Act is invalid because the purpose is to make it more difficult for States to impose income tax. Forbidding taxpayers from paying State income tax until Cth income tax has been paid goes beyond an incidental power - seeks to extent the substantive power granted under s 96 Taxation under s 51(ii) is limited to Cth taxation for Cth purposes (see also Mason J in Hematite)

After these two cases, the battle over s 96 has been won by the Cth - can use s 96 to overcome the restrictions in s 51(ii) of non-discrimination.

Further limitations on the Grants power Federal Roads Case (1926) Mentioned in p 455 This case was about the Cth policy of rural development and population distribution throughout the Cth Gave money to the States on condition that the States would construct certain roads at the direction of the Cth If the States accepted the grant, they also had to contribute funds At issue in this case was the intrastate issue - some of the roads being built were intrastate roads o Argument put that s 96 cannot be used to impose conditions that are outside of Cth's constitutional powers This argument was rejected by the HCA - s 96 plainly warranted these conditions, even conditions outside of s 51 heads of power The Cth could use conditions to regulate subject matter which was otherwise outside of this constitutional power It is still valid under s 96 if the Cth directs how the money is used. It is still valid even if one of the conditions is that the States themselves must partially fund the project. Moran (1939) The aim of the Cth was to set up the following regime: o The aim of the scheme was to assist the Australian wheat industry o Imposed Cth taxes on all flour millers, wherever they were in Australia

Under Wheat Industry Assistance Act 1938, the Cth returned these taxes to the States in the form of grants, with conditions: The States distribute this money to wheat growers Each wheat grower was to receive an amount proportionate to the amount of wheat produced o The whole idea was to maintain a stable wheat price in the Cth The trouble was that there was no wheat growing in Tas, but it did have flour millers - its millers were taxed, but the money was not returned to wheat growers because there were none The money was instead given back to the Tas government, which then reimbursed the flour millers. However, chances were that the other states would not receive back the full amount of tax that they paid - got back 90% NSW challenged the Act - discriminatory because Tas was not paying tax - millers were getting back all their tax, NSW wheat growers were not S 96 was used to effect in substance a discrimination in the taxation between states JUDGMENT: HCA rejected this argument - examine each of the provisions separately and determine them accordingly If the taxation and grants provisions are in separate Acts, they each have a separate constitutional significance o The Tax Act was valid because it did not discriminate between States - millers from all States were charged the same rate o Special treatment for Tasmanian taxpayers arose from Tasmanian legislation - Cth simply granted the money to the Tasmanian Government, which they gave back to the millers Evatt J (dissenting): Argued that the scheme had to be seen as a composite one designed to evade constitutional limits on the Cth found elsewhere in the Cth When you see closely connected (not just accidentally or coincidentally) taxing statute with a grant statute the aim of which was to create discrimination, it should be struck down Decision went to Privy Council: PC gave Evatt's dissent some force Said that if you can show that the object of the legislation was a colourable use of the grants power to effect a discriminatory tax, it could be struck down Not enough evidence to strike down the legislation in this case Since Moran, the HCA has taken far more substantive approach to these matters - look at the substance and operation of these statutes. The HCA today is more likely to give effect to Evatt's dissent - using s 96 to effect a discriminatory tax. In Moran, it was argued that the passing of money back to the wheat growers was not a grant to the states at all, but the states were used merely as conduits for the Cth to give money to individual wheat growers. This argument was rejected - state assistance of wheat industry would involve giving money to wheat growers. DOGS case (Defence of Government Schools) p 462 S 96 grants were given to the states on the condition that the funds were given to nongovernment schools o These schools were either church schools or independent private schools The argument was that the Cth was not giving a grant to the States, but the States were just a conduit to the Cth giving money to schools

HCA rejected this - these schools were educating young people, and because the Cth was supporting the system through grants, states did not have to do it. The benefit to the states was still there o Wilson J: it is a non-coercive law which grants money to States and States decide whether or not to accept At the end of the day, are there any limitations on s 96 at all? DOGS argued that by giving money to church schools, what the government was doing was establishing a religion contrary to s 116 of the Constitution o In Australia, there is not the strict separation of religion and state as in the US o What s 116 meant was that Cth could not establish a religion as a state church, or to impose religious tests for public office JUDGMENT: If the Cth was in fact trying to breach s 116, the HCA would strike it down. S 96 cannot be used to breach s 116 Example: Say the Cth wanted to impose a religious test for the holding of public office, or entry into universities etc. The Cth would not be able to do this under s 116 of the Constitution. HCA has said that under no circumstances would it permit the Cth to overcome any right given by the Constitution, whether express or implied, through the use of s 96. When it comes to human rights and fundamental principles, the HCA is far more sensitive to what s 96 is being used to achieve. What about s 51(xxxi)? If the Cth compulsorily acquires property, it must compensate you on just terms. Magennis v Commonwealth Cth wanted to resettle returned servicemen by providing them with land, as a reward for their service The amount of money that the Cth would have to pay to acquire the land was overwhelming The Cth decided to get the State governments to take the land, because they were not required to compensate landowners on just terms, and then give grants to the States to cover their costs Cth drew up a grants statute whereby the Cth would fund by way of grants the acquisition of land on less than just terms and the states would acquire the land (esp NSW) This statute was challenged - argument put that the Cth was using the grants power to overcome a particular limit or a right that people have against the Cth in s 51(xxxi) JUDGMENT: The HCA was able to find mention in the statute of what the Cth was actually doing Held that this was not an exercise of s 96 but an exercise of s 51(xxxi), even though the states were doing the acquiring using Cth money S 51(xxxi) applies to any compulsory acquisition of property - immaterial whether the acquisition is made by the Cth or some body authorised by the Cth or by a State in agreement with the Cth Cth must have an interest in acquiring property under s 51(xxxi), either legal or proprietary, otherwise it would not be with respect to s 51(xxxi)

The Cth and NSW still kept their agreement, but this time the Cth removed every reference to acquisition of land and simply gave money to the states. States then used this money to acquire the land Pye v Renshaw p 476 NSW legislation authorising compulsory acquisition of land was amended to exclude reference to the Cth-NSW agreement HCA reverted to strict legalism - there was no suggestion in the grants statute as to what the money was to be used for The NSW statute only said it was acquiring land, did not give a purpose. A State Act is not affected by s 51(xxxi) HCA held that it could not hold this scheme to be unconstitutional - it was the states that were acquiring the property, and there was not enough evidence that they were doing so for the Cth When it is the case of a clear right, the HCA will not allow any use of s 96 to override it. When it is a case using a scheme that is perhaps not as obvious, the HCA will take a more legalistic approach.

Week 11b - Defence power (and excise)

S 90 Constitution - Excise power Not examinable - just be aware of what this provision means. Makes exclusive the collection of customs and excise to the Cth. If the states were to enact excise provisions, it is not a case of s 109 inconsistency but straight away invalid by s 90. One of the big issues in 20th Century is what is the meaning of excise. Initially, excise was a tax on the production of goods. This was eventually extended to include a tax on goods at all stages of a transaction. This meant that for the states, they lost further financial independence. If excise was only on the production of goods, states could tax the wholesale and retail of goods. S 90 applies not just to the transaction of goods, but even if the tax is a tax in substance although not in form. Hemitite petroleum Between oil refineries in NSW, there were pipelines that transferred the oil and belonged to oil companies There was an initial licence fee to use these pipelines - relatively benign fee Then state government decided to impose an annual fee of $10m to use the pipelines o Had effect on price of oil coming from these companies o State essentially taxing companies at the expense of consumers This was challenged in court Mason J: Rejected the argument that the tax was not a tax on goods or excise, but was a tax on the pipeline Shown to be a tax on oil, even though it could not be shown that it fell on the transaction - Ha case - substance over form Court has rejected the narrow view of excise - confined to taxes upon production and manufacture - and adopted broader view that it extends to taxes upon goods to the point of receipt by the customer Bolton v Madsen (1963) formula - excise must be directly related to the goods and the liability must be a step in the production, manufacture, sale or distribution of the goods o This is no longer accepted by majority of the Court o This formula focuses on form rather than substance The relationship between tax and goods is easier perceived where tax is levied at the point of production than when levied at point of sale or distribution o Excise prima facie appears to be an immediate burden on production or manufacture An excise is a tax upon or in respect of goods if it enters into the cost of the goods and is reflected in the price at which the goods are subsequently sold o This has been criticised in later cases for being too broad - covers State payroll tax, land tax etc o There should also be some relation between the tax and the thing being taxed Ha v NSW (1997) FACTS: NSW Act imposed on the wholesale and retail sale of tobacco a monthly licence fee of $10 plus a percentage of the value of tobacco sold - up from 30% to 100%

NSW argued it was not an excise because 1) the Act did not prescribe production or manufacture of tobacco to be the discrimen of liability, and 2) the imposts were merely fees for a licence to sell tobacco and not a tax on tobacco sold JUDGMENT: Brennan CJ, McHugh, Gummow and Kirby JJ: Argument of production and manufacture being the discrimen of liability already rejected in earlier cases o Nothing in Ch IV of the Constitution implies that a duty of excise is limited to production or manufacturing If a State tax was imposed on goods produced or manufactured interstate, it would breach s 92; if a State tax was imposed on goods of local manufacture and production, it would be a duty of excise Accepted that an inland tax imposed on sale or distribution of goods would be a duty of excise only by reason of its burdening production or manufacture The 100% fee could not be regarded as a mere licence fee Dawson, Toohey and Gaudron JJ (dissenting): The purpose of making duties of excise exclusive to the Cth was to prevent States from impairing the common external tariff, not to create a Cth economic union A State tax that does not fall selectively on imported goods (duty of custom), does not fall selectively on locally produced or manufactured goods (duty of excise) and does not discriminate against interstate goods for a protectionist purpose would not breach ss 90 and 92 Whether a tax on locally produced goods discriminates against those goods in favour of imported goods is a question of substance, not form - if affirmative, then it is a duty of excise o A non-discriminatory tax would not become discriminatory if it applied only to local goods due to an absence of imported goods The formula set out in Bolton and Parton should be overruled In this case, the taxes on tobacco fall indiscriminately on local products and imports. Nor did it discriminate against interstate tobacco for protectionist purposes There is strong support for the minority approach that an excise is a tax which falls selectively upon local production or manufacture of goods (the narrow view). However, the problem with this approach is that a non-selective tax imposed by a State might still undermine Cth tariff policy. S 51(vi) Defence power Defence power is an example of a purposive power. Gives a clear indication of the sort of consequences that arise when dealing with purposive powers. S 51(vi): "...the naval and military defence of the Commonwealth and of the several states and the control of the forces to execute and maintain the laws of the Commonwealth." Parliament has control of the armed forces and can make laws with respect to it. Underlying the Constitution is violence/armed power. At the end of the day, in order to protect our Constitution and security of Australia, extreme force is capable of being used. All the more reason why it is so imperative that we have a Constitution to ensure that this power is only used in extreme cases and never against the people of Australia. The laws that emanate from this power must be for the defence of the Commonwealth and of the several states, but also for the execution and maintenance of the laws of the Commonwealth.

Because it is a purposive power, must take into account purpose when the law is being made, not just subject matter. The ambit of the power is elastic - can be broad in certain circumstances and narrow in others. It is essentially for the defence of the Cth - if the Cth is at war, the power is far broader than if the Cth is at peace. This is because there is a far greater number of things to do in defence of the Cth when the Cth is in war than in peace time. Eg we are at war. Can the Cth detain people in "comfortable detention" purely for being born in an enemy nation. YES. This law could not be done during times of peace. Eg in time of war, could the Cth pass a law that regulated the price of bread under the defence power? YES. The whole country has been mobilised to defend the country - must be able to feed the populace to defend the country - arguable that the law is for the purpose of defence. What is critical in determining the ambit of the power is the court's willingness to determine the rationality of the power as against the external circumstances. Ultimately the court has to create a range of measures that determine whether it is for defence purpose or not. When looking at defence power, must make assessment of the type of security situation that exists. 1. Profound peace - ambit of defence power at its narrowest 2. Hot war, particularly if Australia is facing invasion - defence power at widest ambit 3. Period of preparation for war (eg late 1930s) - ambit is expansive 4. Post-war period - there may be some need for a wide ambit The difficulty with the traditional classifications is the terrorism that has confronted us in the last 10 years. In traditional war, the enemy head of state would warn the country or officially declare war. With terrorism, not only is this warning not present, it is not war between states and it is the civilian population that is targeted. Read Zines Ch 11 Farey v Burvett (1916) FACTS: The Cth for the purposes of the war (WW1) had prescribed a maximum price for which bread could be sold Farey sold bread at a greater price and was charged and convicted for this Farey challenged the constitutional validity of the legislation with respect to the defence power Argued narrow approach - s 51(vi) allowed only laws dealing immediately with the armed forces and the direction of their use JUDGMENT: HCA rejected this argument - broad approach must be taken to s 51(vi) Griffith CJ: Griffith was renowned for being protective of states' rights. If Griffith was willing to take an expansive view of defence power, it is an indication of how uncontroversial the broad approach is o Defence was one of the primary motivations for federation in the first place P 358 - important reference to M'Culloch v Maryland. Griffith brings forward a fundamental constitutional influence - HCA takes a broader approach to interpreting the constitution than it otherwise would

Marshall CJ: we admit that the powers of government are limited and that its limits are not to be transcended. But we think that the sound construction of the constitution must allow to the national legislature that discretion with respect to the means by which the powers it confers are to be carried into execution, which will enable that body to perform the high duties assigned to it, in the matter most beneficial to the people." o "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist within the letter and the spirit of the Constitution are constitutional" The words "naval and military defence of the Cth" are not words of limitation - does not mean that all the Cth could do was to control the armed forces The concluding words "...maintain laws of Cth" are not words of limitation either o The word defence includes all acts of such kind as may be done by the UK either under Parliament or royal prerogative for the purpose of the defence of the realm, except as prohibited by the Constitution - full plenary power Defence power is fundamental - must read it in broader sense to give discretion to Cth to pass laws for the protection of the people Whilst the defence power is recognised as a broad power, its ambit will depend on the circumstances of the situation. The ultimate test (p 359) is "can the measure (ie the law enacted) in question conduce to the efficiency of the forces of the empire?" o If YES, the law will be within power o The question is not "does it conduce" but rather "can it be regarded as conducing". The court does not determine whether it does or it doesnt. Can a reasonable person regard the measure as conduce to the efficiency of the forces of the empire Conversely stated: "Is the connection of cause and effect between the measure and the desired efficiency so remote that the one cannot reasonably be regarded as affecting the other" Even if the court itself thinks that the measure is not conducive of efficiency, if it reasonably could be, then the court will allow it. If it is beyond rational bounds, the court will strike it down. o This range of rational bounds will expand and contract depending on the external circumstances. The greater the danger, the greater the rationality of the measures Griffith then said "the power to make laws with respect to defence is a paramount power...If it comes into conflict with any reserve state rights, the latter must give way" o Even in this pre-Engineers time, the defence power was not subject to reserve state power thinking o This is certainly the position post-Engineers Note 2 (p 359): Makes it clear that when the court is determining the validity of the law, the court is not concerned with the actual effectiveness of the measure. It may well that the court thinks the measure is not effective (in its own opinion) o Margin of appreciation test - giving a margin of appreciation to parliament because parliament is more suited to determining these things than the court is o Isaacs J: "If the [Act] may conceivably in such circumstances even incidentally aid the effectuation of the power of defence, the Court must hold its hand and leave the rest to the judgment and wisdom and discretion of Government" Note 3: Stenhouse v Coleman per Dixon J: o Made it clear that the defence power is purposive. It was not so obvious at that time that the defence power was purposive - Griffith's earlier comments could not be justified without making the defence power purposive

The purpose of the law must be determined from the instrument that is the law in question, the facts to which it applies and the circumstances which call it forth - ie the court can inform itself of the surrounding security situation (war, peace, preparation, post war) o "It is evident that among these circumstances the character of war, its notorious incidents, and its far-reaching consequences must take first place." o It is not necessary for the Cth to prove according to the usual rules of evidence these security situations. The court can just take judicial notice of the situation The Court limits itself to those things that can be taken judicial notice of. The Court doesnt want evidence; what it is saying is that if you want the ambit of the defence power to increase, the circumstances must be such that the court can take judicial notice of it

The difficulty with Dixon J's commentary is that when talking about terrorism, to what extent can the court actually take judicial notice of the seriousness of the threat? There are no armies on the move, bombs falling etc. Eg Parliament imposes a law where anyone walking through CBD must undergo a police check. How can the court take judicial notice of the seriousness of the terrorist threat? If such a law is challenged and the HCA had to make a declaration about this, it would be difficult for it to determine the issue. The Parliament can easily exaggerate the threat of terrorism to impose laws that are restrictive on liberty. Communist Party case (p 360) FACTS: During the height of the Cold War, fear of communism was justified (arguably) Australia was at peace and not in preparation for war - narrow ambit of s 51(vi) Cth passed the Communist Party Dissolution Act 1950 o The Act was prefaced by a preamble and a number of recitals - Parliament attempted to justify in its preamble why the law was valid under s 51(vi) o Stated that the Australian Communist Party, offices and others were engaged in espionage, sabotage and other forms of treason designed to overthrow the Australian government, and that they were striving to undermine vital Australian industries Essentially saying that the Communist Party was a threat to Australia's security. Having established this, Parliament then enabled itself to pass these laws under s 51(vi) to dissolve the Party S 4 of the Act declared the Communist Party as an unlawful association and by force of the Act, was dissolved. This Act is specifically saying that Parliament has declared that the Communist Party as dissolved by force of the Act The Act then declared that any other association connected to the Communist Party was unlawful and dissolved S 5(1) - This is all at the authority of the Governor General Another organisation could challenge the fact that they were sufficiently associated, but could not challenge that the Communist Party was a threat S 9 - GG had the discretion to make a declaration that a person was a member or officer of the Communist Party, or a communist, or engaged in or likely to engage in activity prejudicial to the defence of the Cth. If a person becomes a declared person, a number of civil disqualifications would apply under s 10: o Incapable of holding any office under the Cth o Incapable of being an officer of an incorporated Cth authority o Incapable of holding office in any industrial organisation (eg unions) Ss 11 and 12 contained provisions setting out how current office holders would be removed S 14 provided that the Cth was prohibited from entering into any agreement or contract with a declared person

This is essentially a proscription list Communist Party and many associated organisations commenced proceedings for a declaration that the Act was void and for an injunction restraining the Cth from acting JUDGMENT: Full court agreed that these preambles/recitals stating the danger of the Communist Party and its associates could not in themselves be taken into account to determine whether the defence power was in play o Ie Parliament cannot simply set up the circumstances Majority: Held the Act was invalid Fullagar J (leading judgment): The Court confines itself to matters of which it may take judicial notice - it does admit evidence on particular state of affairs as distinct from a general fact of war or national emergency o Taking of evidence might involve disclosures which would be prejudicial to the Executive's efforts in dealing with the emergency Defence in s 51(vi) is defence against external enemies, but also includes legislative power to make laws for the protection of the Constitution against domestic attack Parliament can say what it likes about the Communist Party, but the court cannot take what Parliament says in its preamble as in any way influential to the court The Parliament cannot take away from the court the power to determine whether the necessary nexus existed between the Act and the defence power o It is for the court to determine whether the circumstances are such that Parliament can pass these laws, on the basis of judicial notice or other evidence "The validity of a law...cannot be made to depend on the opinion of the law-maker (referring to the preambles/recitals), that the law is within the constitutional power upon which the law in question itself depends for its validity." The legislation itself must provide the scope for the court to test its validity against the constitution The operation of the law must be made to depend on the objective existence of some fact, proved or judicially noticed, that connects the Act with the power o In the context of this Act, Fullagar is suggesting that if the Act simply said that communist conduct is an offence, that is perfectly fine. The court is then able to determine, by looking at the course of conduct, whether it is within defence power. Then test whether particular organisations or persons are engaging in this conduct, and convict them as such o What the Parliament was doing here was just declaring that these people are engaging in communist activity to connect the Act with the defence power o No declaration (preamble) containing allegations in favour of, or against, the object of an Act can be conclusive for or against that object. It is something for the Court to decide. Such recitals are not even prima facie probative evidence of the truth of what is recited o The preamble and recitals are regarded as statements of opinion or belief as to facts, inserted to explain the occasion of what is enacted and to provide justification for it. They will only be important and potentially decisive if the situation is wartime Doctrine of the Communist Party case - the stream cannot rise about its source. The source is the Constitution; the stream is all the institutions set up by the Constitution and all the laws that emanate from Parliament. The source determines the validity of every other action. It is not possible for the stream to somehow declare itself "pure" constitutionally Parliament cannot deem constitutional facts

Example: s 51(vii) gives Parliament power to make laws with respect to lighthouses. Lets say the Cth wanted to do something to a particular building that wasnt a lighthouse (and thus Cth has no power over it) - "for the purposes of this Act, the Main Quad is deemed to be a lighthouse" o Parliament CANNOT do this - declare by its statute declare something that it isn't simply to bring it into constitutional power o By deeming the Quad as a lighthouse, Parliament is deeming a constitutional fact whether something is or isn't a lighthouse Saying "all striped lighthouses are deemed as lighthouses" is not deeming a constitutional fact, because s 51(vii) doesnt discriminate between types of lighthouses Another example: under trade and commerce power, there is a regulation regulating interstate trade in oranges. For the purposes of the Act, apples shall be deemed as oranges. o This is not deeming a constitutional fact - the constitutional fact is whether the trade is interstate or intrastate Further example: all intrastate trade in oranges shall be deemed to be interstate trade o This is deeming a constitutional fact. By deeming that, the Cth has attempted to get power over intrastate trade These are all examples of the stream rising above the source To get power over the Communist Party, the Cth had to deem the Party as a threat to enliven the s 51(vi) power Activities can also be deemed constitutional facts. See p 211 for another eg (Fontana Films case) o In that case, the secondary boycott was prohibited o Those activities that damaged the activities of trading corporations could be regulated by the Cth o Eg want to get a trade union involved - "a trade union is deemed to be engaged in such damaging activities if a member of that union engages in that activity" This is saying that the union will be deemed as engaging in damaging activity if a member of the union engages in this activity - deeming constitutional fact Parliament can deem a non-constitutional fact because it is not rising above the source Example: law about exporting and importing goods from Europe. For the purposes of this Act, Turkey shall be deemed as a member of the EU. Parliament can deem a constitutional fact if it is simply stating a truism Example: for the purposes of this Act, trade in goods crossing NSW/VIC borders shall be deemed to be interstate trade. This appears to be deeming a constitutional fact, but it is in fact stating a truism It is only a truism if the court declares it a truism

There are some exceptions to Parliament not being able to deem a constitutional fact: Parliament can reverse the onus of proof of a constitutional fact o Eg a group of people shall be deemed to be immigrants - this is deeming a constitutional fact o All Australians shall be deemed as immigrants unless they can prove otherwise - this is valid if the reversal of the onus of proof is not too onerous o Eg if Parliament said you had to prove you were born in Australia beyond reasonable doubt, it would be going too far - deeming a constitutional fact because reversal of onus is too onerous High Court felt that the appropriate way to proceed is set up a number of offences that could be committed by anyone, and then proceeding to charge certain parties in accordance with the law.

The court was open to the circumstance that if such an Act did come in power during hot war (especially with the USSR), the Communist Party could have been declared unlawful. It is not possible, as the Parliament attempted to do here, to proscribe certain individuals/parties, merely at executive discretion, civil disabilities. The High Court suggested that it would almost bow to the will of the executive and not ask too many questions in a state of hot war - virtually saying it will turn a blind eye. If the court is willing to turn a blind eye if the situation is serious enough, Cicero's maxim "in times of war the law is silent" would actually apply. This means that there is an exception to the Communist Party doctrine (stream rise above source) if the situation is serious enough (only for defence power). Court has acknowledged that at certain times, there are things above even the supreme law of the land does not apply. At that level, the only thing restraining the executive is their sense of our society - must not take advantage of their power. The case confirms the position that the defence power is not limited simply to controlling the armed forces, things of a military nature and military operations. During times of peace, this may be the case because the ambit is at its narrowest. Summary of Communist Party doctrine: 1. Cannot deem the constitutional fact. Constitutional fact can be a person, status, activity, etc. 2. Can deem a truism. The trouble is that sometimes Parliament thinks it is deeming a truism but is in fact deeming a constitutional fact. 3. Whilst Parliament can deem a truism, it can, for constitutional purposes, deem a nonconstitutional fact (because it makes no difference). For example, there is a law that regulates the export of live lambs to the EU. Parliament says "for the purposes of this Act, Turkey is deemed to be a member of the EU". Here, the power is not concerned with Turkey being EU, but the export of lambs being foreign trade. 4. The only time Parliament can deem a constitutional fact is if it reverses the onus of proof of the constitutional fact. The critical proviso is that the onus required is not itself too onerous. The reversal of the onus must in fact be a true reversal of the onus. What you are required to prove must relate exactly to what the constitutional fact is doing. Eg in Fontana (p 211), it was said that the trade union will be deemed to have engaged in secondary boycott activities of its members, unless the union could show it took all reasonable steps to prevent this from happening. This is not proving that the trade union is not responsible for its members. What is the union supposed to do to satisfied "all reasonable steps"? This is not enough. Should have said "...unless it could show that under no circumstances did it encourage or advise its members to engage in this behaviour" - this onus is provable. However, it may be too much to require proof beyond reasonable doubt. Ultimately, it is the Court that determines the source, even though the Court itself is part of the stream.

Markus Clark v Commonwealth (1952) The Act authorised the GG to make regulations for, or in relation to, defence preparations. The regulation made prohibited certain borrowings by companies and certain share issues unless consent of the Treasurer was obtained. The regulation provided a judicial remedy of a court

order directing the Treasurer to show that his refusal or conditional consent was for purposes of or in relation to defence preparations and nothing else Dixon CJ: this Act does afford objective tests by which its connection with the defence power may be seen or ascertained. The Act's provisions specify a course to be pursued and considerations and purposes to be effectuated, the consequences of which will show whether the measure might reasonably be considered to conduce to the defence of the Commonwealth The Court felt that the availability of sufficient judicial remedies did not mean that the Parliament or Executive was legislating itself into power. The Treasurer's determination of a borrowing of money as prejudicial to defence preparations was not conclusive - judicial review available Note 1: Prof Sawer believes that Parliament played a trick on the High Court - judicial remedies nowhere near sufficient to say that Parliament has not legislated itself into power

Thomas v Mowbray (2007) FACTS: Plaintiff admitted he had trained at the camp of a listed terrorist organisation Had a federal magistrate impose a control order on him Question: were these control orders valid under defence power? Since 9/11, the paradigm towards defence has changed. The Court has to deal with a range of things that are not easily classified as peace, preparation, war and post-war. How does the court determine what level of national security to apply? It is still not clear after this case What was argued was that control order not justified o The threat of terrorism was not by a national state o Terrorism was not against Australia as a nation, but against innocent civilians o This does not come within a recognised paradigm Only Kirby accepted this argument. The other judges said that any attack against the civilians of Australia is an attack against Australia as a nation The difference between terrorism and collateral damage from regular armed conflict is that terrorism wants to cause collateral damage and to harm civilians JUDGMENT: Terrorism is something that can be taken into account by the Court when determining the ambit of the defence power "The defence power is not limited to defence against aggression from a foreign nation or to external threats, not limited to protections of bodies politic as distinct from the public, not confined to waging war in a conventional sense of combat between forces of nations"

Week 11b - Implied freedom of political communication

There are a number of express rights contained in the Constitution (Ch 8 casebook). The classic right is s 116 which establishes freedom of religion and prohibits the establish of any official religion. S 117 creates a right not to be discriminated against based on residency in a state. Sorts of things that look like rights but are not rights: S 41 right to vote, but Parliament determines the franchise S 80 right to trial by jury for federal indictable offences - Parliament determines what indictable offences are, so there is not absolute sense of what an indictable offence is The reason why the Constitution did not include further rights was because the people at the time thought that it wasnt necessarily. Believed that Westminster system of government + rule of law + common law meant no need for further protection. This was well and good, but only really applied if you were Anglo-Saxon - reflected in the first Act of Parliament - White Australia Policy. This situation existed up until the 1990s. We did have certain implied freedoms, mainly from Ch III separation of powers. Where there are minorities existing, there may be justification for having civil rights. In the 1990s, the High Court became more proactive. Street v QLD Bar Association Deane J: Began to talk about the Constitution being interpreted as a living tree Court should interpret the Constitution according to current community standards and not be limited by the dead hand of the framers Under the Mason Court, this went a lot further, but has been more restrained in recent times. The last judge to push this line of thinking was Kirby J. The stronger the sense that the Constitution is a living tree, the more likely the Court is to imply rights in the Constitution. During the period where this view was dominant, the implied freedom of political communication emerged. The living tree concept was very controversial: What are current community standards, and how are they determined? Isn't this best left to parliament than the unelected judges? o Came to the fore in Wik Peoples case - activism of the Court was challenged by politicians. There was a feeling that the Court was going on an activist frolic on its own rather than determining current community standards, it was just imposing its own policy Nationwide News v Wills (1992) Latham CJ in Burns v Ransley (1949): Cth Parliament has no power to pass a law to suppress or punish political criticism, but excitement to disaffection against a Government goes beyond political criticism Gaudron J: freedom to discuss matters pertaining to government institutions and agencies may be curtailed by a law under s 51, but only if its purpose is not to impair freedom, but to

secure some end within power in a manner reasonably and appropriately adapted to that end Brennan, Deane and Toohey JJ invoked doctrine of representative government as foundation for implied freedom of political communication Brennan J: "Where a representative democracy is constitutionally entrenched, it carries with it those legal incidents which are essential to the effective maintenance of that form of government. *+the freedom of discussion which is essential to sustain *representative democracy] is firmly entrenched in the Constitution"

ACTV v Commonwealth (1992) FACTS: The Political Broadcasts and Political Disclosures Act 1992 introduced Part IIID into the Broadcasting Act 1942 Part IIID prohibited political advertising on radio and TV during federal, State and local government election periods. Broadcasters not prevented from broadcasting news or current affairs of political nature or comments on such items JUDGMENT: Mason CJ, Deane, Toohey and Gaudron JJ invalidated the whole of Part IIID; McHugh J held Part IIID invalid except in its application to the Territories; Brennan J upheld Part IIID except those provisions relating to State elections; Dawson J did not think that an implication of freedom of political communication existed, and upheld the whole of Part IIID Mason CJ: It is necessary and correct to draw implications from the Constitution - not limited to the actual text of the Constitution and their express or implied meaning Absent a freedom of political communication, government would cease to be responsive to the needs and wishes of the electors, and cease to be truly representative A law restricting the communication of certain ideas or subject matter will be harder to justify than a law restricting a form or channel of communication Deane and Toohey JJ: Of the view that the freedom of political communication extends to all political matters, including matters relating to State and local levels of government Gaudron J: Talks about how the principles of representative democracy may entail freedom of movement, freedom of association, freedom from slavery etc discussed in earlier cases (particularly by Murphy J) o This is the kind of freestanding principles and implications that McHugh J warned about there is nothing in the text or structure of the Constitution to indicate anything more than an implication of freedom of political communication Freedom of political communication extends to matters within the province of the States Brennan J: In order that a law may validly restrict a freedom of political communication, the restrict must serve some other legitimate interest and must be proportionate to the interest served o The proportionality of the restrict to the interest served is incapable of a priori definition McHugh J: The power conferred by the Constitution to make laws with respect to federal electoral process may be used to prevent fraud, intimidation, corruption and misleading information in an election without infringing the rights conferred by ss 7 and 24

The above two cases have now been overruled, but the principles remain valid:

There is an implied freedom of political communication and no law may abrogate that right. Very broad, covers any type of communication of even limited public interest. Does not mean you can defame people There must be a public interest element

The method of the development was very controversial - not all judges appreciated what was happening. Only McHugh J saw from the outset what was going on - not opposed to the implication, but opposed to how it was based. The freedom of political communication established in the above cases is derived by implication from the Constitution - undermines the reasoning in Engineers, which decided that no implications could be drawn from the Constitution McHugh J in Theophanous: those High Court judges who held that there was a freestanding principle of representative democracy had departed from the principles of interpretation laid down in Engineers. Since Engineers, the High Court "has consistently held that it is not legitimate to construe the Constitution by reference to political principles or theories that find no support in the text of the Constitution" o Interpretation starts with the text, not with some theory of federalism or politics What the Court said in the two cases was that the Constitution set up a form of representative democracy. Critical step - Court then said that given the Constitution set up representative democracy, they took it out of the Constitution and made it an overarching principle separate from the Constitution. Since representative democracy is set up, whatever it requires can be an implied right. Representative democracy required: Freedom of political speech - public needed to be informed of the political sphere One vote one value All adult citizens have a right to vote Guarantee of equality Theophanous v The Herald and Weekly Times (1994) - high watermark case FACTS: The judges going along with this line of thinking realised where it was heading and wanted to bail out Theophanous was a politician Defendant newspaper published articles criticising his view - criticised for his conduct and views as chairman of Joint Standing Committee on Migration and chairman of another committee Criticism included Theophanous was an idiot and favoured Greek migrants Theophanous took proceedings in defamation against the newspapers The newspapers claimed that because Theophanous was a public person and it made political comments, they had a qualified privilege from discrimination laws - greater leeway to say defamatory things, as long as they are not reckless o Note: do not have to publish to defame. Can also go around in the dark to ruin someone's reputation In addition to this, whatever the defamation laws say, the newspapers have an absolute right to say whatever it likes as long as it is political communication o Newspaper arguing that it had immunity from all laws that limited speech, as long as its speech was political Anglo-Australian rights - right against laws that abrogate said rights Here, newspaper arguing American-type rights of absolute immunity

o Not arguing that the defamation laws are invalid, but that it is immune to them JUDGMENT: Majority of High Court accepted this argument, and created an immunity out of it This is the case where certain judges realised the Court went too far Mason CJ: 1. There is implied in the Constitution a freedom of political communication 2. Political communication will not be actionable under defamation laws if the publisher: a. Was unaware of the falsity of the material published; b. Did not publish the material recklessly; and c. The publication was reasonable in the circumstances 3. A publication attracting this freedom can be described as a publication on an occasion of qualified privilege. That a federal election is about to be called is irrelevant Criticism of the views, performance and capacity of an MP and of the MP's fitness for public office is at the very centre of the freedom of political discussion Difficult to limit the scope of "political communication", but at least "refers to all speech relevant to the development of public opinion on the whole range of issues which an intelligent citizen should think about" o However, there is a significant difference between the freedom of political communication and an unlimited freedom of expression (as in the US) Deane J: Deane J adopts the living tree approach - construction of the Constitution should not be limited by the dead hands of its framers Went further than Mason CJ, Toohey and Gaudron JJ to preclude completely the application of State defamation laws to impose liability in damages on publications of political nature Deane J went further to say that the implication of rights, privileges and immunities can be from either the Constitution's express terms or the fundamental doctrines upon which it was structured o This is going too far - taking an implication (representative democracy) from the express terms of the Constitution and making it a principle separate and above the Constitution Brennan J (dissenting): It is one thing that a law cannot apply to an area (political communication); it is another to possess a personal immunity from the application of a general law. The freedom which flows from the implied limitation of power is not a personal freedom but a limitation on legislative and executive power

Theophanous led to the unanimous decision of the High Court in Lange v ABC. Lange v ABC (1997) Lange was PM of NZ and sued ABC for defamation after it published defamatory material on him JUDGMENT: Freedom of political communication does not confer personal rights on individuals. The implication defines the nature and extent of the freedom - the freedom is not free-standing Brennan J in Cunliffe v Commonwealth (1994): "the implication is negative in nature: it invalidates laws and consequently creates an area of immunity from legislative control." The freedom is not absolute - limited to what is necessary for the effective operation of representative government Since McGinty (1996), it is clear that the Constitution gives effect to "representative government" only to the extent that the text and structure of the Constitution establish it o The question is not "What is required by representative government?", but rather "What do the terms and structure of the Constitution prohibit, authorise or require?"

McHugh J: The right exists - can imply rights from Constitution, but cannot derive them from any free floating notion you happen to think exists in the Constitution. The freedom of political communication derives from the precise form of representative government set up by the text of the Constitution o Must look within the Constitution to discover what precise form of government is set up, and from that, imply rights where possible Rejected that this right was an immunity. Rather, the right was a restriction on the legislative power of all governments of Australia o The freedom protected by the Constitution is not a freedom to communicate. It is a freedom from laws that effectively prevent Australians from engaging in political communication Key constitutional sections ss 7 & 24 o Ss 7 and 24 state that when electing Senators or MPs, they are directly elected by the people. This means that the people must be able to make a choice - they must be informed by talking amongst themselves, by media, by interest groups, by the politicians etc This freedom does not exist only at election time. It exists all the time because it is not just at times of elections when people are informed of who to vote for This freedom is not limited to political commentary about federal politics - can be state, territorial or anything which may influence a person as to how they vote. This is extremely broad o One argument was that this freedom cannot apply to commentary in NZ o Rejected - freedom extends not just to discussion about Australian matters, but all international matters of politics as long as there is some relevance to Australia The critical thing is that this is not an absolute right - not saying that Parliament can at no time burden speech. Parliament is allowed to burden speech (permissible to have defamation laws, racial vilification laws, laws prohibiting inciting of violence) The two tiered test: 1. Does the law effectively burden freedom of communication about government and political matters either in its terms, operation or effect? If YES, doesnt mean it has breached implied freedom; 1.1 (mentioned in unanimous judgment) Is the object of the law compatible with the maintenance of the constitutionally prescribed system of representative government? 2. Is the law capable of being regarded reasonably appropriate and adapted to serve a legitimate end the fulfilment of which is compatible with the maintenance of representative and responsible government as prescribed by the Constitution In defamation laws, there must be some exception to allow greater freedom to discuss matters relating to public figures - will be reasonably appropriate and adapted o Must conform itself to the freedom, and common law of defamation must be developed in line with the implied freedom of political communication Expanded defence of qualified privilege in a defamation action Eg a law prohibiting the telling of Irish jokes and imposes 2 years jail time is going too far

Summary of implied freedom of political communication First principle from Lange: there is a freedom of political communication. It does exist, but is not derived from some free floating concept of democracy that emerges from the Constitution, but

rather from the precise form of representative and responsible government set up by the Constitution. Remember ss 7 & 24 which refer to our representatives being directly elected by the people - can imply that there is some guarantee of freedom of at least political speech. Second principle: the degree of speech protected is very broad - virtually guarantee of free speech. Anything that might have any bearing on political matters, public interest matters that are remotely relevant to decision to vote is protected by this right. The only thing that is not protected is purely private speech. Third principle: freedom does extend beyond issues of federal politics - can be local, state, federal, international, as long as it is not something purely trivial. Fourth principle: no temporal restraint on the freedom. It is not limited to election periods everything that occurs in the life of the government is relevant to your ultimate decision to vote. Test for breach of freedom: 1. Does the law effectively burden freedom of communication about government or political matters either in its terms, operation or effect? 2. Is the law reasonably appropriate and adapted to serve a legitimate end, the fulfilment of which is compatible with the maintenance of the constitutionally prescribed system of representative and responsible government? This indicates that there is now absolute freedom of political speech. The test does allow the Government in appropriate circumstances to burden this speech. Defamation laws - Lange: The test is not an immunity - it is just a defence against laws that can be declared invalid Defamation laws, to be constitutionally valid, must provide some scope for media outlets or other commentators to be able to talk about the private life of an individual who is a public figure, and must not treat that type of commentary the same way as it would treat a private citizen Eg. If what you say about someone is untrue and they are a private citizen, there is no defence. You can be reckless, negligent, malicious or genuine mistake, you can still be sued if it is wrong. Make sure it is absolutely true and not exaggerated. However, if this test is applied to all commentary about politicians and public figures, it might discourage the legitimate writing and publication about these figures because if they get it wrong, they would have no defence huge disincentive to newspapers and etc What defamation laws do is that it provides a separate defence of commentary in the public interest. As long as publishers are not malicious or reckless, and genuinely made a mistake, they cannot be sued for defamation o Cannot claim freedom of political communication if recklessly or maliciously prosecuting a public figure The common law of defamation as it develops by the courts must develop pursuant to these principles - High Court will ensure this Coleman v Power (current correct test) p 729 HCA changed the test slightly - doesn't really make a lot of difference in its application What the Court has done is change the words "the fulfilment of" to "in a manner" o How do you determine "in a manner"? A law operates as a law Previous test - if there is a legitimate end and is fulfilled, ask if the law is reasonably appropriate and adapted to achieve that end

New test is trying to look at the end of the law and the way the law is implemented. However, "manner" is already covered by "appropriate and adapted" The law was a QLD statute that provided that any person in a public place or near a public place that uses abusive, insulting or threatening words against another person is liable for fine or imprisonment o Prohibiting abusive and threatening speech is not breaching the freedom o Unless "insulting" can be read down, this will be breaching freedom of political communication HCA held that "insulting" goes too far. As long as the words are not inciting violence and are not threats, they are covered by the freedom

Levy v Victoria (1997) FACTS: Case important because it dealt with whether symbolic speech (non verbal) is protected by the freedom o Non-verbal speech can be more powerful and provoking than verbal speech The relevant law was a VIC hunting season regulation that created certain summary offences permitted people to go on particular land set aside to duck hunt. To hunt, you had to have a licence - offence if no licence and no land Levy and his people were animal rights activists - go onto the land during duck hunt season and hold up wounded ducks for the hunters to see Prosecuted for being on the land and engaging in those activities Challenged the regulation on the basis that it breached his freedom of political communication First question: is symbolic speech conduct protected by the freedom? HCA said YES Does the regulation burden symbolic speech? YES they do - not permitting animal rights activists on the land unless they have a licence JUDGMENT: Applied old test (this was before Coleman) What is the legitimate end of the duck hunting regulation? To protect people from wandering onto the land and getting shot? To provide some outlet for people who like to shoot ducks? HCA held that this end is compatible - the law was to protect people, not to shut them up The regulation was also appropriate and adapted because it did not impose heavy sanctions HCA upheld the validity of this regulation Mulholland v Australian Electoral Commission The right to have a political party's name printed on the ballot paper is conferred by the Commonwealth Electoral Act and not a right under the common law or statute law of the Commonwealth or States other than that Act. Since the Act itself confers the only source of that right, Mulholland's claim that the Act burdened the Democratic Labor Party's freedom of political communication failed The impugned Act must burden an existing right that exists independently of the Act Herald & Weekly Times v Popovic (2003) Action in defamation brought by a judicial officer in Victoria A judicial officer is independent of government and politics and the qualified privilege does not extend to judges APLA v Legal Services Commissioner (2005) McHugh J: o Exercise of judicial power is not within the freedom recognised by Lange

Discussion of the appointment or removal of judges, the prosecution of offences, withdrawal of charges, provision of legal aid and funding of courts are communications that attract the Lange freedom because they concern, expressly or inferentially, acts or omissions of the legislature or Executive Kirby J: o Disagreed with McHugh J o Lange extended to protecting Ch III and the judicature - courts are part of government and resolve issues that are, in the broad sense, political o Parliament cannot impede communication essential to the operation of the Judicature provided for in Ch III

Week 12a - Intergovernmental immunities

Intergovernmental immunities To what extent can Cth laws bind the States? Referring to States in their official capacities - State governments and its official organs. There are issues on the reverse side - to what extend can State laws bind Cth laws? Engineers has said that there is no implied immunity of government instrumentalities from each others laws. The effect of this is that Cth laws that are constitutional bind the States. The problem becomes are there any limitations at all? There are some preliminary limitations: Cth cannot bind the States in areas where it has no head of power - but this is just a question of validity in the first place. The only way it might do this is to use s 96 grants Cth cannot require the States to breach one of the express or implied prohibitions on Cth power. Eg Cth law cannot require the States to breach s 116 freedom of religion Dixon, when he was a barrister, was arguing that the Cth cannot bind the States if it is discriminating against the States as States (ie the law treats the States as States differently from private persons); similarly, if it just singles out a particular State. Structural integrity argument (in its mature form) Cth cannot bind the States if the law takes away central functions of the State or prevents the States from functioning as such. Two arguments - discrimination and structural integrity Dixon J was in a minority at the start: Australian Unions case, West v Commissioner of Taxation. What sort of argument would you put to the court when arguing these two limits? Dixon directly attacked the two limbs of Engineers - Cth laws can bind the States and State laws can bind the Cth and argued that it was not as absolute as it appears, that the limitations and intergovernmental immunities are found in Engineers itself. "In a dual political system...neither government legislates for the other. But supremacy, where it exists, belongs to the Cth, not to the States." Melbourne Corporation v The Commonwealth (1947) FACTS: Relevant legislation was s 48 of the Banking Act - a bank could not engage in business with a State government or with a State government authority (local councils included), without the consent of the federal treasurer o State governments are being singled out as States and being discriminated against. Private persons could still engage business with banks Melbourne Corp is the equivalent of Sydney City Council and wanted to do banking with its private bank Federal treasurer refused consent and told the Melbourne Corp to change its bank to the Commonwealth Bank Melbourne Corp sought orders to have s 48 declared invalid JUDGMENT: Two judges who declared the legislation invalid on the basis of pure characterisation - cannot bring s 48 within the banking power because the dominant characterisation (pre Fairfax) was with respect to State functions, not banking Dixon J:

Held the law valid under the banking power o Note: if the court held the Act valid under banking power, Engineers would have it be binding on State govs Brought in the arguments of discrimination to hold the law invalid If a law operates upon a Cth head of power, it is prima facie valid unless some reason appears for excluding it. That the law serves a purpose outside of the head of power (for non-purposive powers) is insufficient to invalidate the law. The result is that laws confined to an existing head of power may, in its operation, validly undermine State legislative authority. However, if such a law was enacted under the same head of power for the purpose of restricting or burdening a State's exercise of State functions, it will be invalid The law was discriminating against State governments as State governments for federal reasons, therefore the law was invalid o If our Constitution is a federal constitution, there must be some protection for the States Starke & Rich JJ: Put forward the structural integrity argument to hold the law invalid Any Cth law which would prevent a State from continuing to exist and function as a State is invalid because it is inconsistent with the express provisions of the Constitution o S 51 powers are conferred "subject to the Constitution" Cth law invalid in two instances: o Where the Cth singles out the State or its agencies and imposes on them restrictions which prevents or impedes them from performing State functions o Where, by the operation of some Cth law of general application (non-discriminatory), a State is prevented or impeded from functioning as a State The Constitution sets out a dual system of State governments and a Cth government - it is beyond power of either to destroy or abolish the other Counter-argument: If you prevent States from financing their activities with whomever they wanted to get money from, is that taking away an essential function of the States? o YES - if you go to a bank manager for a loan, their only concern is whether you can repay. However, if a State government goes to the Commonwealth Bank for loans, the Commbank can tell the Treasurer and the Treasurer may impose some hoops for the States to jump through before they get the money - this takes away the State's ability to function as a State After this case, these principles/limits weren't very concrete. Payroll Tax case (1971) Payroll Tax Act 1941 imposed 2.5% tax on all wages paid by an employer. An employer included the Crown in right of a State (ie State government and any public authority operating under State statute) Argument put that this was invalid Court held that the tax was valid - did not breach Melbourne Corp principles because the tax did not discriminate against States as States - all employers had to pay this tax. Did not undermine States' ability to function as States The significance of this case was that there was a strong minority of 3 that disputed the application of the Melbourne Corp principles. This minority rejected that these principles existed and adopted earlier principles that it was all a matter of characterisation - simply a case of determining that the law was within Cth power, and if it was, it would apply to bind States. Barwick J was in the minority. He was a very conservative judge (pro States rights), but still took a Labor position. McTiernan (conservative) was also on the minority. This may have been Barwick's

revenge against Dixon - Dixon never considered Barwick to be the best nor gave him the respect that Barwick thought he deserved. Queensland Electricity Commission v The Commonwealth (1985) FACTS: This is the modern case that shows how the discrimination principle works This case adopted the first qualification to the discrimination principle - rational discrimination Case involved an industrial dispute between the Electrical Trades Union and the Electricity Commission QLD parliament enacted legislation varying the conditions of employment of electricity commissions and boards. The law did not only allow dismissal for refusal of instruction to work, but also a fine for doing so. It also required that no strike clauses be inserted in contracts Electrical Trades Union applied to Conciliation and Arbitration Commission. If the dispute exists, the Cth commission would have control over the dispute. CAC found a dispute to exist. QLD did not like this Unions in other States blockaded against QLD for the statutes passed in QLD The Cth parliament enacted a special Act - Conciliation and Arbitration Electrical Industry Act 1985 o S 6(1) - Act applied to this specific QLD dispute o S 6(2) - it would apply to other disputes between Unions and the QLD Electrical Authority into the future o S 7 - the Conciliation and Arbitration Commission must settle this dispute as soon as possible o S 8 - took away from the Commission, in this type of cases only, a discretion not to hear cases o S 9 - the dispute must be heard by a full bench of the Commission. If there is an element of this particular dispute that goes beyond QLD borders, must hear the QLD aspect of the dispute separately Every part of this Act is geared towards the QLD dispute - discriminatory This case secured the Melbourne Corporation principles JUDGMENT: Judges all accepted that the legislation was singling out QLD such that it was not binding on the State But for the Melbourne Corp principles, the law was otherwise valid o If the law is invalid, no need to look to Melbourne Corp principles Mason J: Made three comments about the discrimination principle: o Prohibits discrimination against a particular State as well as against the States generally o The principle protects State legislatures as well as executive governments o Not every law which deprives a State of a right, privilege or benefit will amount to discrimination. A law which deprives a State of a right, privilege or benefit not enjoyed by others, so as to put the State on equal footing with others, is not discriminatory The Melbourne Corp principles are not restricted to a State and such of its agencies as represents the Crown in the right of the State. Governmental functions in general, including freedom to choose whether a function should be carried out by a department or an authority created for that purpose, are protected by the principles Conciliation and arbitration is not a power concerned with States specially, unlike eg defence power Declared hold Act invalid Brennan J (dissenting):

It would state the implication too widely to say that the Cth is prohibited from making any discriminatory law which burdens or disables the exercise of State functions. To determine whether a discriminatory law is valid or invalid, it is necessary to identify the particular burden or disability placed on the States and then determine whether any legislative power authorises the Cth to impose that discriminatory burden. The legislative power must expressly, or by necessity impliedly, authorise the discrimination Discriminatory law is prohibited if the burden or disability affects the independence of a State's exercise of its powers - no Cth power supports such a discriminatory law The validity of a discriminatory law must be determined by reference to its terms and the subject matter to which the law relates. If a discriminatory law is calculated to provide for particular circumstances affecting that State alone, there may be no real discrimination or the discrimination may be justified Held s 6(1) valid only. S 6(2) that applies the Act into future is invalid The discrimination here was against the dispute, not against QLD. The dispute had been around for so long and caused so much economic damage that it was rational and justified to single out this dispute in an Act Principle: is there a legitimate end for this discrimination, and is the law reasonably appropriate and adapted to achieving this end? S 6(2) was held invalid because it was an assumption that every time there's an industrial dispute in QLD, that it would always reach a scale of the current dispute. This would be discriminating against QLD as a state and not the specific industrial dispute

Tasmanian Dam Case (1983) Mason, Brennan and Deane JJ considered that the prohibition was directed against the exercise of Cth legislative powers in a manner which would be inconsistent with the continued existence of the States or their capacity to function as a government, and not against interference with or impairment of any function which a State government undertakes This must be how the Court interpreted the prohibition in Richardson v Forestry Commission (1988), because the Cth Act specifically targeted a Tasmanian forest and prohibited the Tasmanian government from engaging in certain activities that would have adversely affected the protected areas Australian Education Union case (1995) FACTS: The general definition: any law that undermines the States' ability to function as such, or takes away central functions of the States would be invalid Industrial Relations Act s 111(1)(g) stated that the Cth Industrial Relations Commission could refrain from hearing a matter or it could dismiss a matter for the reason that further proceedings were unnecessary or undesirable for the public interest S 111(1)A prohibited the Commission from exercising this particular power when the dispute in issue was a dispute from a State where the dispute could not be heard by the State arbitrator What happened was that at that time, VIC had just abolished its State industrial arbitration system. If you could get your matter to the Cth Industrial Relations Commission, it would be heard because of s 111(1)A There is a possible argument here that there is discrimination against VIC JUDGMENT: Court held that there was no discrimination against VIC The Statute was simply ensuring that an aggrieved union, employee or employer, which could not find remedy in a State, could at least go to the Cth and the Industrial Relations Commission won't turn its back on them

This was applicable to every State in Australia, not singling out VIC. It so happened that VIC did not have an industrial relations system Even though there is in a sense discrimination, the point is that it is sufficiently accidental (though not entirely accidental) not to breach the discrimination requirement. It would have been different if the Act said "any dispute that arises from VIC" Must think intuitively about structural integrity. In this case, the issue arose as to whether Cth orders from the Cth Arbitration Commission, if it applied to State employees (employees of State govts, their instrumentalities and agencies), would prevent the State from exercising its essential functions - State must have full control of its employees High Court came up with the following resolution: o P 983 2nd last paragraph o To have the Cth award applicable to State public servants does not breach structural integrity principle, but there are three things that are immune: Number and identity of persons that the State wishes to employ The term of employment (length of employment), eg 3 year contracts, 5 year contracts etc The number and identity of persons that the State wishes to dismiss, with or without notice, on redundancy grounds o If any of those 3 things are touched, Cth law is invalid. General terms and conditions of employment, such as minimum wages and working conditions, are valid o However, there is a different rule which applies to the upper echelons of public service eg Ministers in their capacity as Ministers of the Crown, Ministerial assistants and advisors, heads of government departments, higher level statutory office holders No Cth award can touch these people. The full terms of employment of these people must be in the full control of the State that employs them, because of the significance of these people to the essential functions of the State State governments need to be able to set salaries to attract the best people o Judges and Ministers are not employees of the State Unanimously upheld in the Industrial Relations Act case Query whether judges are employees of the upper echelon of the State - probably not

Victoria v Commonwealth (Industrial Relations Act case) (1996) The Industrial Relations Act 1988 was amended to provide safety nets for employees in States which did not have a compulsory industrial arbitration system. The IRC could impose on employers (including the States) obligations concerning minimum wage; equal pay; termination of employment; discrimination; leave; collective bargaining; and right to strike The High Court unanimously upheld the decision in Australian Education Union case with respect to the three matters of employment that could not be affected by Cth legislation and the employment of higher level State personnel Austin v Commonwealth (2003) The judges appeared to collapse the discrimination limb into the structural integrity argument Discrimination is no longer treated as a stand-alone principle to undermine the Commonwealth law. It is now merely evidence of a breach of structural integrity From a practical point of view it makes no difference How does it work? o Back to the QLD Electrical Commission case - if it was found that QLD was being discriminated against, wouldnt say breach of discrimination limb of Melbourne Corp. Say breach of discrimination aspect of the structural integrity argument The rational discrimination point still holds. If discrimination is excused because it is rational, structural integrity has not been undermined

FACTS: The Cth enacted 3 Superannuation Contribution Acts to impose a surcharge tax on the superannuation provider of high income earners. However, s 114 of the Constitution prevents the Cth from imposing taxes on State property. To get around this, the 3rd Act enacted treated State judges differently from other high income earners and Federal judges, by taxing them directly (since the State itself was the "superannuation provider") NSWSC Chief Justice Austin challenged the constitutional validity of the Act Majority held the Act invalid; Kirby J dissented Gleeson CJ: Discrimination is not determined by the imposition of some financial burden, but rather the impairment of and interference with a State's capacity to function as a government Differential tax treatment of State judges is constitutionally impermissible, not because it imposed a financial burden on the States, but because it interfered with State arrangements for the remuneration of their judges. This affected the States' ability to recruit and retain judges to perform an essential constitutional function of the State The validity of the Cth Act is determined at the time of its enactment. It is irrelevant that the State then enacted its own legislation to alter its judicial pension scheme Gaudron, Gummow and Hayne JJ: The discrimination principle does not stand on its own One principle - consider the form, substance and actual operation of the law and see if it burdens or impairs the States from functioning as a government. Discrimination and structural integrity are manifestations of one constitutional implication - that there must exist States with independent governments McHugh J: Did not agree with Gaudron, Gummow and Hayne JJ that there was only one principle. Said that Queensland Electricity Commission and Melbourne Corporation clearly indicate two principles