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The Melbourne Corporation Principle Notes

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This is an extract of our The Melbourne Corporation Principle document, which we sell as part of our Federal Constitutional Law Notes collection written by the top tier of University Of New South Wales students.

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The Melbourne Corporation Principle (Part 1) Commonwealth Laws and the States a) The Melbourne Corporation Principle

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In the Engineers' Case it was said that the principles applied to the CTH applied to the states and generally judgments moved in focus from what the CTH could to States to what a State could do to the Commonwealth

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In Melbourne Corporation v Commonwealth these vague notions were coalesced into a doctrine that limited only what the CTH could do to states

Melbourne Corporation v Commonwealth (1947) 74 CLR 31 Facts: During WWII CBA was given a power to oversee private banks and control the supply of money and credit. The Banking Act 1945 sought to make this permanent. Ben Chifley (PM and Treasurer) proposed to compel states and authorities, including LGAs to bank with the CB. Section 48 provided that banks could not conduct banking business for a State or authority of a State, including an LGA without consent of the treasurer. The Melbourne City Council were notified that it was an authority to which s 48 applied and thus sought to have it struck down. Held: s 48 is invalid

Dixon J noted that the Engineers' Case stood for the prima facie rule that a power to legislate wrt a given subject gives the Parliament power to make laws on that subject which affect the operation of State agencies. But this is subject to three reservations:The prerogative and tax power (irrelevant to this CaseThe use of federal legislative power to make, not a law of general application, but one which discriminates against States or places a particular disability on the operation of its activity and the execution of its constitutional powers - essentially exercising its executive function

Though this control can be attempted where a matter falls within a head of power but it doesn't fallow that that connection with the matter brings a law aimed at controlling the State's exercise of its powers within the exercise of CTH legislative power. These laws wear two aspects:

1. The matter wrt which it is enacted is restriction of State action - prescribing the course the executive should take or limiting the courses available to it. The direct operation of such a law is to place a disability on the State and thus it can be described as a law for the restriction of State action in the chosen field

2. The other aspect is that the law is connected with a subject of CTH Power a. If so insubstantial, tenuous or distant by the control it seeks to impose upon state it will fail because

it cannot be described as being wrt that subject matter

b. But if it operates directly on a matter in an actual head of power its validity couldn't be denied on the grounds of irrelevance. Generally such a law will be valid unless a further reason appears to exclude it i. May be difficult on powers like lighthouses, bills of exchange etc. but not wrt things like tax

But there must be firm adherence to the principle that the federal power of taxation won't support laws placing special burdens on states. The federal system itself is the foundation of the restraint on the use of power to control States - and this constitutional objective applies to all powers if States are made the subject of special burdens (except those which are concerned with special states - 31, 32, 33, 35).

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Regardless of the overthrow of the doctrine of reciprocal immunity of government, the CC does not countenance the notion that the legislative powers of a government in the system can directly deprive another of powers committed to it, or restrict that government in its exercise

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The foundation of the Constitution is the concept of central government and separate State governments - the Constitution predicates their continued existence. States are conceived as bodies politic whose existence and nature are independent of the powers allocated to them.

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It is for this reason that the distinction is drawn between a law of general application and one singling out single governments for special burdens

On this footing the constitution proceeds to distribute powers between the CTH and States and provide for their inter-relation

His honour noted that the fact that a power may be abused doesn't mean it's to be restricted forms a proper objection to the view that governments cannot exercise power interfering with others, but it is irrelevant where the question is an attempt to restrict/control the State in the exercise of a function forming part of its executive power is permitted by the Constitution

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Of further note is the fact that the federal government's power is necessarily stronger than that of the States - it carrying affirmative grants of executive power*

These two considerations add great strength to the implication protecting the CTH from the operation of State laws affecting the exercise of federal power but also amplify the field protected and limit the claims of States to protection from exercises of CTH power

Thus the considerations on which States' title to protection from CTH control doesn't arise from the character of their powers but from their position as separate governments exercising independent judicial functions

"To my mind, the efficacy of the system logically demands that, unless a given legislative power appears from its content, context or subject matter so to intend, it should not be understood as authorizing the CTH to make a law aimed at the restriction or control of a State in the exercise of its executive authority. In whatever way it may be expressed an intention of this sort is, in my opinion, to be plainly seen in the very frame of the Constitution"

(The other judges based their conclusion on different emphasis):

Starke J also thought that the maintenance of States and their powers is as much an object of the Constitution as the maintenance of CTH power and thus they could not abolish one another. However he differed from Dixon J in that he thought the presence/absence of discrimination was not a decisive test for constitutional power:

? Instead the question was a practical one: o

"Whether legislation or executive action thereunder on the part of the CTH or of a State destroys, curtails or interferes with the operations of the other, depending upon the character and operation of the legislation and executive action thereunder. No doubt the nature and extent of the activity affected must be considered and also whether the interference is or is not discriminatory. But in the end the question must be whether the legislation or the executive action curtails or interferes in a substantial manner with the exercise of constitutional power by the other

Latham CJ and Williams J didn't like the idea of discrimination as a criterion either but focussed on characterisation. Unlike Dixon J who argued that the validity of a law within the core of a power couldn't be denied, for these two the mere fact that a law was characterised as restricting the power of States could preclude characterisation as valid. Discrimination for Latham CJ, in the sense actually used, is legislation by the CTH wrt a State or State functions as such and not with respect to a head of power.

? The Commonwealth Parliament has no power to make laws wrt State governmental functions as such, and the State Parliaments have no power with respect to Cth governmental functions as such
? Furthermore, federal legislation which though within a head of power which is clearly about what is a state governmental functions will be said to interfere 'unduly' with that function and thus be invalid. The invalidity of a federal law seeking to control which seeks to control a State governmental function is brought about by the fact that it is in substance a law wrt a subject as to which the CTh Parliament has no power to make laws (easier to deal with than what is "undue" which is a vague conception)

Rich J approached the question as one of an "implied immunity" rather than "characterisation". For his honour, though there are no State reserved powers, this is subject to the CC itself which expressly provides for the continued existence of States. Anything preventing this is necessarily invalid since it is inconsistent with the constitution. There are two such classes of case;

1. Where the CTH singles out states or agencies to which they delegate some of the normal/essential functions of government and imposes restrictions on their ability to perform these functions or impede them from doing so a. These would be invalid since nothing in the CC authorizes them

2. Where though the States and their essential agencies aren't singled out they are subject to a provision of general application which in its particular application would so prevent or impede them a. A general income tax Act purporting to exclude revenues of the States from taxation would be in this

Victoria v Commonwealth (Payroll Tax Case) (1971) 122 CLR 353 Facts: This case was a major re-appraisal of both the Engineers and Melbourne Corporation Case. The Payroll Tax Act (Cth) imposed a 2.5% tax on all wages paid by an employer. S 3 of the Pay-roll Tax Assessment Act defined employer to include the Crown in right of a State and a municipal corporation or Local Governing Body/Public Authority constituted under a State Act. The MC Principle was confirmed but not applied to invalidate the tax. Barwick CJ echoed his own argument as counsel in the MC case as adopted by Latham CJ.

Barwick CJ remarked that the Constitution, in providing for states, didn't give the CTH legislative power over them or their powers and functions or governments.

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This didn't derive from an implied limitation but because of the specific allotment of powers to the Commonwealth.

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Thus a law which in substance takes a State or its powers/functions of government as a subject matter is invalid for being unsupported by a Federal Grant of Power

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Furthermore, if the subject matter of the law is in substance of the States or their powers/functions, there is no room for holding it to be at the same time and in the same respects a law upon one of the enumerated topics in s 41 - for the purpose of this particular case the validity of the law claimed can be approached to be within mutually exclusive lists like the Canadian Constitution

Windeyer J disagreed with the mutually exclusive categories approach and held that the inability to legislate on the States or their powers/functions arises out of a constitutional implication whichi limits the manner in which the Federal Parliament can lawfully exercise its power to make laws with respect to a particular subject matter. The implication or 'underlying assumption' relates to the use of power and not the inherent nature of the subject matter of the law

Gibbs J held that types of law in question were invalid because they infringed implied restrictions on CTH Power. He agreed with the view of Sir Owen Dixon that a CTH law is bad if it discriminates against States, in the sense that it imposes a special burden or disability on them thus it could be described as a law aimed at their description

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However his honour held that this wasn't the only function of the limitations - laws that would prevent States from continuing states to function (which would probably be discriminatory anyway) are also invalid o

He commented that the essential/non-essential distinction drawn by Rich and Starke JJ was inappropriate to modern conditions ? However in this case it was unnecessary to resolve the issue

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In some cases it would be possible to show that the nature of a tax on a particular activity renders the continuing activity of that activity practically impossible (seems that this would be one indicia)...

? It is not so in this case - the Tax here does not prevent States from discharging their function. They

may have less money available for public purposes since they have to pay it, but this is so for all taxes and cannot itself amount to an impediment to the State sufficient to invalidate it Does the legislation then discriminate against the States (The legislation here exempted payment of private school teacher wages from tax)
? Though it might be said that the State is under a substantial burden not placed on other persons employing School teachers - this is not the right way to look at the matter o

Most taxing statutes contain provisions for exemptions/exceptions and it is of the very nature of such statutes that not all taxpayers are treated with absolute equality

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The singling out of private employers for a tax exemption denied to States doesn't mean it discriminates in the Sir Owen Dixon sense.

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The question is to some extent one of degree - here all that can be said is that in respect of one field of employment the State is taxed, though certain private employers escape

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If the position of States is compared to that of private employers generally, it can't be said that the States are under a special burden or disability that the legislation is aimed at the restriction or control of the States

b) Restatement: Two Principles Commonwealth v Tasmania (1983) 158 CLR 1 (Tasmanian Dam Case) Facts: CTH legislation halted the construction of the Franklin Dam in Tasmania by the HEC. It was argued that this was a direct interference with the state's hydro-electric program affecting so much of its land mass to warrant the limitation on the use of CTH power for the sake of "Federal Balance"

Mason J held that the thrust of doctrine is an implied prohibition (rather than an issue of characterisation) on enacting laws which "singles out" a State or imposes some special burden/disability on the State or inhibits/impairs their continued existence of capacity to function. Discrimination is a sufficient but not necessary condition.

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What it does is to prohibit interference with or impairment of the State to function as a government, rather than to prohibit interference with any function which a State government undertakes

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It isn't enough that the CTH adversely affects the State in exercising a governmental function - it must emerge that there is a substantial interference with the State's capacity to govern that will threaten their continued functioning as an essential element in the federal system

Deane J

? The fact that the Parks comprise 11% of the land was the basis of Tasmania's submission.
? But the declaration under the Act didn't involve operative interference with the legislative powers of Tasmania. Neither can the prohibitions in the Act be seen as inconsistent with the continued existence of TAS and its capacity to function
? The fact that the land is Crown Land under the Constitution provides no immunity - the CTH has an express grant to acquire State property on just terms.
? No doubt they interfere with the legislative/executive functions of the State (as with any case of invalidity under s 109) but they do not involve a discriminatory attack on the exercise of its executive authority

Brennan J
? This isn't a case of a CTH law purporting to restrict the departments of government/parliament or by the SC of the buildings for its use.
? The CTH measures impose restrictions on use of the Parks - to affect land as such doesn't impair the functioning of the executive government of the State though they limit the areas in which the executive can make its will effective
? The measures diminish the powers of the TAS executive but do not impede the processes by which they are exercised. A restriction on doing specified acts in the exercise of an executive power to use and control waste lands is not an invalid intrusion on the exercise of that power.

Queensland Electricity Commission v Commonwealth (1985) 159 CLR 192 Facts: The two limbs of the MCP identified by Mason J (1: A law must not discriminate against a state 2) May not inhibit or impair its continued existence/capacity to function), each operate independently as a sufficient ground for invalidity. This was confirmed in QEC v CTH where a CTH law was struck down as discriminating against the State of QLD.

In April 85 30 trade unions imposed a 24h land/sea/air blockade on QLD in protest of legislation curtailing trade union rights and banning strikes by electricity workers. By the C&A (Electric Industry) Act the CTH sought to establish a special procedure for expedited settlement of the despite in the Cth C&A Commission. S 6(1) applied to the "industrial dispute between the Electrical Trade Union and other authorities. The QEC was a party to the dispute.

Mason J once again cast the MC principle as consisting of two elements: (1) The prohibition against discrimination which involves the placing on the States of special burdens or disabilities (2) The prohibition against laws of general application which operate to destroy or curtail the continued

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