#7112 - General Principles Of Commonwealth Legislative Powers Theory - Constitutional Law

Pre-Engineers case, the HCA applied the reserved State powers doctrine, which states that as a matter of implication power over matters not mentioned in the Constitution was reserved to the States.

• Everything not given to the Cth was State power and Cth laws found to have impinged on reserved powers were invalid.

• This resulted in narrow constructions of Cth power in order to reserve everything else to the States.

• Cth passed law supposedly “in respect of taxation” (a Cth power) to impose an excise tariff on manufacturers of agricultural machinery if they did not comply with Cth policies regarding wages paid to employees, such that it was preferable to pay the wages than the tax.

  • the law was clearly introduced for an ulterior motive of protecting the workers.

• Barger (a manufacturer) brought an action challenging the tax.

• DECISION: majority held the law was a law designed to regulate the conditions of labour, not a law with respect to taxation. They held that the tax power should not be interpreted to enable the Cth to enter into a subject matter intended to be reserved to the States.

• Engineers’ trade union claimed for an award against 844 employers including three WA government employers. The question was whether a Cth law enacted under CC s 51(35) could authorised the making of an award binding State government employers the same way it could bind the other employers.

• ISSUE: does Cth Parliament have the power to make laws binding on State employers under s 51(35)?

• DECISION: Parliament can make such laws. Knox CJ, Isaacs, Rich and Starke JJ held that the doctrine of ‘implied prohibition’ (reserved State powers) could no longer be permitted to sustain a contention. Instead, the Cth heads of power are to be interpreted in accordance with the natural meaning of the words, and no limitations not found in the words should be read in.

Laws must be capable of being characterised as falling within a Cth head of power (under s 51 (concurrent), s 52 (exclusive powers) and some powers like in ss 81 and 96).

1. Consider scope of Cth powers (interpret Constitution)

2. Determine character of Cth law: is it with respect to a head of power?

There is a presumption in favour of broad interpretation of Cth powers consistent with the natural meaning of words and subject to their context and purpose (Jumbunna Coal Mine).

• If capable of a broad interpretation on the natural meaning, that is the interpretation that should be given.

• If the context/purpose suggest a narrow interpretation should be given it will be, but it is rare for the courts to think it should.

• Rationale: Cth powers are plenary (s 51 and 52 confer powers to make laws for the POAGG of the Cth). Also, since a Constitution is intended to last possibly for centuries, the powers should be interpreted broadly to deal with unforeseeable developments .

The CC s 51(39) grants express power to make legislation “with respect to… matters incidental to the execution of any power vested by this Constitution in the Parliament...’ This conferral of legislative incidental may be superfluous (see implied incidental power below). This section is most relevant in allowing Cparl to exercise power incidental to the powers of other arms of government.

Every express power the Cth is accompanied by power over matters ancillary or incidental to the subject matter (see, eg, Grannall v Marrickville Margarine Pty Ltd). They are not expressly or strictly within the power named, but are implied on the basis that such power is necessary to properly regulate a subject matter and to make the regulation truly effective.

Non-purposive powers are those that do not have a specific purpose, describing instead an activity, type of person, recognised category of legislation or an object. Most powers are of this nature.

Purposive powers lay down a specific purpose to be pursued (eg defence).

Implied incidental power is purposive.

• Cth laws deprived superannuation funds of income tax exemptions unless the fund included ‘public securities’ (Cth securities, State bonds and stocks, securities in public utilities).

• The trustees of a super fund for John Fairfax and Son Ltd challenged the laws on the basis they were not laws with respect to taxation under s 51(2) but in fact laws with respect to investment activities.

• DECISION: the court held that the test of characterisation for the non-purposive tax power is the direct legal operation test. The only direct legal duty imposed by the laws was the duty to pay income tax (no actual requirement to invest in public securities). Accordingly it was a law with respect to taxation.

• States all imposed their own income tax, and just before WWII this presented an obstacle to the Cth collecting the maximum tax it could. This was because the Cth cannot discriminate between States: it had to impose the same tax on the residents of all States. Where one State had high income tax, the Cth could only impose a tax for a small amount before the tax was excessive on the people, and due to the prohibitions on discrimination, could only impose this smaller tax amount even in States where income tax was lower.

• Cth passed legislation to impose a uniform income tax scheme without the States’ consent (which had been previously refused). Under the grants power (s 96) the States would be paid whatever they would have collected themselves. It also enacted provisions requiring payment of Cth tax before State tax, and enacted a law allowing the Cth to take over all offices, furniture, records and public servants of the States (under the defence power).

• Four States challenged the legislation’s validity, arguing that the object of the scheme was to force the States to abandon income tax and that the Cth power should be limited to Cth income tax and not interpreted so broadly as to allow the Cth to take over State income tax.

• DECISION: HCA held that the legislation was valid. Under the direct legal operation test, the motives of Parliament were irrelevant. The law created an obligation to pay income tax, therefore it was a law with respect to taxation, as was the requirement to pay Cth before State tax. The grant of collected tax was squarely under s 96. The taking over of offices etc was an act done in defence.

• Cth Act prohibited the export of zircon and rutile concentrates unless the exporter had the minister’s approval. Murphyores sought approval to export concentrates from Fraser Island. The minister refused to consent until a Commission conducted an environmental impact study.

• Murphyores sought an injunction to prevent the inquiry from proceeding as they thought it would find the mining detrimental to Fraser’s ecology and approval would be denied. It also sought a declaration that the minister could not take ‘non-Commonwealth’ considerations like environmental impact into account in exercising the power of approval under CC s 51(1).

• DECISION: the Cth could exercise unfettered discretion in deciding to permit or deny mineral exports, as there was nothing in s 51(1) to limit the power to making decisions only by reference to considerations of trading policy. The direct legal operation of the law was to operate on the topic of trade and commerce with other countries, therefore it was a valid law with respect to trade and commerce with other countries under CC s 51(1).

The correct test to use to decide whether the law has the proper character to fall within a Cth head of power is the direct legal operation test.

Per Kitto J in Fairfax v FCT (1965 HCA), the subject matter of the law is determined solely by reference to the operation the law has if valid, by reference to the nature of the rights, duties, powers and privileges which it changes, regulates or abolishes.

1. If a law is plainly about or regarding a Commonwealth head of power, it is a law ‘in respect of’ that power, regardless of whether it has indirect or consequential effects on matters outside that power (see, eg, Murphyores; Fairfax).

2. The consequential effects of the law are irrelevant; even if an indirect consequence of an Act could not be directly achieved by legislating for it, this is irrelevant (even if Cth Parliament contemplated and desired the indirect result) (Latham CJ in SA v Commonwealth (First Uniform Tax Case)(1942)).

3. The existence of a purpose or motive outside federal power will not invalidate the law (Kitto J in Fairfax). Nor will whether the law is just or wise.

Although the direct legal operation test is the primary test, if a law has the practical effect of operating on the subject matter (even if the law is not directed specifically at the subject matter), the law may be valid. [eg making laws directed at third parties in order to protect trading or financial corporations]

• Purpose and practical effect can make a non-purposive power valid but cannot make it invalid (as mentioned in DLO test).

A law may be characterised...