HIGH COURT OF AUSTRALIA

                              Trustees Executors and Agency Company Limited

                                                           Vs.

                                        Federal Commissioner of Taxation

                                (Rich, Starke, Dixon, Evatt and McTiernan JJ.)

                                                    3 August 1933

Rich, Dixon and McTiernan JJ.

We are called upon to decide whether movables situated abroad, which passed from a deceased
person domiciled in Australia by gift inter vivos within one year of his death, are to be included as
part of his estate for the purpose of ascertaining the value upon which estate duty is to be levied
under the Estate Duty Assessment Act 1914-1928. Sub-sec. 3 of sec. 8 provides that the estate of a
deceased person comprises his real property in Australia, his personal property wherever situate if
the deceased was, at the time of his death, domiciled in Australia, and his personal property in
Australia if he was not so domiciled. Sub-sec. 4 then enacts that property which passed from the
deceased person by any gift inter vivos or by a settlement made within one year before his decease,
and certain other interests of which he had divested himself or which were determined or divested at
his death, shall for the purposes of the Act be deemed to be part of the estate of the person so
deceased.

The first question is whether, as a matter of construction, the operation of sub-sec. 4 should be
restricted to property and interests situated in Australia. In our opinion it should not be so restricted.
The purpose of sub-sec. 4 is to extend the dutiable estate of the deceased so as to include property
which, because of dispositions by the deceased or of the nature of his interest, is not actually part of
his estate devolving upon his death. The chief object of sub-sec. 3 is to prescribe the conditions in
which, because of its situation abroad, property actually part of the deceased's estate is excluded.
The provision is expressed in an affirmative form, but its intended operation is to exclude all real
property situated abroad and personal property so situated if the deceased died domiciled out of
Australia. The natural interpretation of the two provisions when read together appears to us to be
that property, which by force of the statute is "deemed to be part of the estate of the person so
deceased," is made subject to exactly the same territorial exclusion and discrimination as the actual
estate.

In opposition to this construction the contention is, briefly, that in the absence of a more definite
expression of such an intention the general words of sub-sec. 4 should be understood to refer only to
property in Australia, and that the charge created by sec. 34 and the apportionments directed or
authorized by secs. 35 and 35A cannot be effective upon or against foreign movables of donees
whose title is complete under the lex situs or loci actus. In our opinion these considerations are
answered by the general plan and nature of the legislation and the form of the two sub-sections. In
the first place, the duty is described as an "estate duty" and the incidence of estate and succession
duties upon movables has been much affected by the domicil of the deceased (compare Winans v.
Attorney-General[1]; and Harding v. Commissioners of Stamps for Queensland[2]). In the next
place, the charge of duty upon, and its apportionment to, gifts must often be ineffectual
independently of locality; for instance, donees will consume or dispose of the subject matter given.
These are matters ancillary and subsidiary to the main purpose, the imposition of the duty upon the
total mass of property at a scale graduated according to the value of the whole. Such matters,
therefore, cannot have much influence upon the interpretation of the provisions defining the
property to be assessed. Finally, the structure and arrangement of sub-secs. 3 and 4 sufficiently show
what the real intention of the legislation was, namely, to include for the purpose of duty in the estate
of a person dying domiciled in Australia personal property wherever situate, whether falling under
sub-sec. 3 or sub-sec. 4.

The second question is whether to do this is beyond the constitutional power of the Commonwealth.
Clearly it is not beyond its power.

For these reasons we think both questions in the special case should be answered: Yes.

Starke J.

The facts are fully stated in the case.

The first question is whether certain personal property situate abroad, which passed from a deceased
person by gift inter vivos within one year before his decease, is part of the estate of the deceased
person within the meaning of the Estate Duty Assessment Act 1914-1928, sec. 8. The estate of a
deceased person comprises (inter alia) his personal property, wherever situate, if the deceased at the
time of his death was domiciled in Australia (sec. 8 (3) (b)); and any property which passed from
the deceased by any gift inter vivos within one year before his decease shall be deemed to be part of
his estate (sec. 8 (4) (a)). It is said that the proper interpretation of sub-sec. 4 is to confine its
operation to property within Australia at the time of the gift or at the time of the death of the
deceased person. But the purpose of sub-sec. 4 (a) is to bring back into the estate of the deceased
person for the purposes of estate duty property that would have formed his dutiable estate, in whole
or in part, if he had not disposed of it. Consequently, it predicates the attributes of the categories of
property contained in sub-sec. 3, and cannot be confined in the manner suggested in argument. It is
insisted that this view will create many practical difficulties in the apportionment of the duty under
secs. 35 and 35A, and in giving effect to the charge under sec. 34; but these considerations cannot
control the clear purpose of sec. 8 (cf. In the Will of Harper; Harper v. Harper[3]).

The second question is whether the provisions of sec. 8 are intra vires of the Constitution. The
decision in National Trustees Executors and Agency Co. of Australasia v. Federal Commissioner of
Taxation[4], resolves this question in the affirmative.

Both questions should therefore be answered in the affirmative.

Evatt J.

The appellants are the executors of the will of George Turnbull Bell who, at the time of his death,
was domiciled in Australia. Within one year before his death the deceased made large gifts to his
children of British and New Zealand Government bonds and certain New Zealand inscribed stock. It
may be taken that the subject of each of these gifts was at the time of gift, and remained until the
death of the deceased, situate out of Australia. In the case stated, two questions are asked,
namely:--
(1)

Whether the bonds and inscribed stock mentioned in par. 4 of this case were "property ... which
passed from the deceased person by any gift inter vivos or by a settlement made before or after the
commencement of this Act within one year before his decease" within the meaning of sec. 8 (4) (a)
of the Estate Duty Assessment Act 1914-1928.

(2)

If the answer to question one be in the affirmative, is the sub-section intra vires the Legislature of
the Commonwealth?

In Jackson v. Federal Commissioner of Taxation[5], Knox C.J., Isaacs and Starke JJ., described the
general legislative scheme. They said:--

The scheme of the Act is this:--On the death of any person anywhere in the world who leaves
property described in the Act, a duty is imposed on the mass of that property, called "the estate of
the deceased person." That estate is defined to include (broadly speaking): (1) all real and personal
property actually situated in Australia, and (2) all personal property anywhere if the deceased was
domiciled in Australia[6].

The same learned Justices added:--

But further, since experience has shown that gifts inter vivos are frequently made in contemplation
of death and intended to operate as testamentary dispositions, though not technically such, it has
been for many years the recognized practice of legislatures to protect the revenue by regarding, for
duty purposes, all such gifts inter vivos as if they had not been made. It has further been a
recognized test, in order to avoid difficulty, delay and litigation that would often be required to
establish that such gifts were in fact made to operate as testamentary gifts, to provide a limit of time
before death as determining the question. This has been followed by sub-sec. 4 of sec. 8, and in that
case all property within the meaning of that sub-section, which passed from the deceased person by
a gift inter vivos within a year before his decease, is deemed for the purposes of the Act to be part of
the estate. It follows that not merely Australian property, but also foreign property, which a
domiciled Australian had within a year before his death and which was not his at the time of his
death, may be his "estate" for the purposes of the Act[7].

The plain result of all these considerations is that all the gifts in question, although passing "from
the deceased person by ... gift inter vivos ... within one year before his decease" are, for the
purposes of the Act deemed to be, contrary to the fact, "part of the estate." It does not follow from
sec. 8 (4) (a) that the value of such gifts must, under all circumstances, be included in the subject
matter of taxation. That depends upon whether the property answers one of the three descriptions
contained in sec. 8 (3). In this case the property so answers because sec. 8 (3) (b) regards the estate
as comprising "personal property, wherever situate ... if the deceased was, at the time of his death,
domiciled in Australia."

The appellant's argument that sec. 8 (4) (a) should be interpreted as confined to property within
Australia at the time of the gift inter vivos cannot be acceded to unless the restrictive interpretation
is also applied to sec. 8 (4) (b) to (e) inclusive. The argument misconceives the fundamental purpose
of sec. 8 (4) (a) so clearly stated in Jackson's Case[8].

The first question should be answered: Yes.

The second question is of considerable importance. It is contended that a Commonwealth law which
purports to impose taxation upon, or in respect of the value of, property situate outside Australia is
invalid, and it is not rendered valid merely because its former owner happened to be domiciled in
Australia within twelve months after his parting with the property. Mr. Herring put his argument
very shortly, but I have stated his position in perhaps its most plausible form.

It is curious that, from time to time, questions still arise as to the competence in relation to "extra-
territorial" matters of the Legislatures of the Australian Commonwealth and of the States; for (1)
such a power not only pertains to, but is an essential part of the conception of, self-government, (2)
the status of the Commonwealth as a "self-governing" Dominion was fully admitted at the Imperial
Conferences of 1926, 1929 and 1930, and (3) the legislative powers of the Australian State
Legislatures are, as so clearly appears from the judgment of Viscount Haldane L.C. in Attorney-
General for the Commonwealth of Australia v. Colonial Sugar Refining Co.[9], dealing with the
Commonwealth Constitution, of precisely the same general nature and quality as those of the
Commonwealth Parliament. A recent illustration where, upon territorial grounds only, power was
denied to a State Legislature, is the case of Commissioner of Stamp Duties (N.S.W.) v. Millar[10]. It
there appeared that the New South Wales Parliament had sought to charge with duty portion of the
estate of a domiciled Victorian consisting of shares held by the deceased in a Victorian company,
which, at the time of death, was engaged in mining business within New South Wales. Rich, Dixon
and McTiernan JJ. said, in denying validity to the law:

Although some connection between the shareholder and New South Wales may be discovered in the
existence there of part of the company's undertaking, the enactment goes beyond legislating in
respect of that connection[11].

Starke J. agreed in the conclusion as to invalidity, and said:--

In my opinion the tax is not levied in respect of such operations, but upon property--shares in the
present case, which are not situate in New South Wales, are not issued by any company incorporated
under the laws of New South Wales, and are not owned by any person resident or domiciled in New
South Wales. But the Act, on its proper interpretation, extends to such a case, and so far, I agree, is
in excess of the powers of the Legislature of New South Wales[12].

The present appellant might, perhaps, have sought for analogy with Millar's Case[13]. In that case,
as in this, the Legislature sought to include in the dutiable estate the value of property situate outside
of the territory. In Millar's Case, the property was owned by the deceased at the time of death but
the deceased was resident and domiciled outside of New South Wales. In the present case, the
deceased was domiciled in Australia at the time of death, but he was no longer the owner of the
property taxed. In Millar's Case, a connection with the territory was established by the use to which
the property was being put at the time of death, for it was embarked, partly at least, in extracting
mineral wealth from the soil of New South Wales. In this case, territorial connection is established
by reason of the domicil of the deceased at the time of death. But here, the tax is imposed, not only
in respect of all personal property owned at the time when a territorial connection with the owner
existed, but also of personal property no longer owned by him at that time. The suggestion in
Millar's Case was that the authority of the Legislature could not extend further than to tax such part
of the value of the deceased person's shares as represented the degree to which the company's share
capital was employed in its New South Wales business. So, it might have been argued here, the
connection with Australia is found in one fact only, actual domicil in the territory at the time of
death, and though that might authorize legislation relating to such connection and so restricted to
taxation of personal property, or perhaps all property, owned by the Australian at that time, it could
not authorize legislation which, ex concessis, taxes personal property owned by a person when he
was not associated with Australia in any way. Of course, the argument would not be met by pointing
out that, according to the admitted facts of the present case, the deceased was also domiciled here at
the time of the gifts to his children, for the legislation proceeds solely upon the foundation of
domicil at the time of death.

I do not suggest that there is a sufficient analogy between Millar's Case, and the present, but it is far
more satisfactory to approach the question of power on broader lines.

Contentions based upon theories which deny the Legislature's power upon "territorial" grounds are
becoming so frequent that it may, perhaps, be useful to consider their general validity. It is well
known that the modern theory of the necessary invalidity of any Dominion law, so far as it
attempted to deal with matters, persons and things outside its borders, is based upon certain obiter
dicta of Lord Halsbury in Macleod v. Attorney-General for New South Wales[14]. The theory was
very convincingly criticised by Professor H. A. Smith (Canadian Bar Review (1923), vol. 1, p. 338).
He said:--

If Courts were always guided by principle the question of extra-territorial legislation would never
have presented any difficulties. Unfortunately the application of the principle has been quite
needlessly confused by the interference of an undefined and imperfectly analysed idea, which has
sometimes been expressed in the old Latin tag, Extra territorium jus dicenti impune non paretur.
Like most maxims of its kind the phrase is of little practical help in the solution of actual legal
problems. If it means that laws may be disobeyed with impunity where the executive power to
enforce them does not extend, the statement is perfectly true but somewhat obvious. If it is meant
that a legislature could never attach legal consequences to acts taking place beyond its own territory,
the maxim would be palpably absurd and would be clearly contrary to the practice of every
legislature in the world. In its original context (Digest 11.1.20), it is used quite properly in relation
to the jurisdiction of Courts and their power to enforce their decrees. The maxim has nothing
whatever to do with the question of legislative competence (pp. 349, 350).

Later the same distinguished authority said (Law Quarterly Review (1927), vol. 43, pp. 380, 381):--

It seems clear from the decision in Ashbury v. Ellis[15] that there is nothing to prevent a colony from
attaching civil consequences within its jurisdiction to acts transacted beyond its borders, and I have
elsewhere given my reasons for thinking that there is no logical reason for denying the competence
of colonial legislatures to attach penal consequences within their own territories to criminal acts
committed abroad, subject to the restrictions which are in practice observed by the Imperial
Parliament in dealing with such matters. This view is supported by the much higher authority of the
late Sir John Salmond.

Professor Smith's reference is to the fact that in 1917 Sir John Salmond, after a close consideration
of the leading authorities dealing with the presence of extra-territorial elements or features in
Dominion legislation came to the conclusion that there was no legal restriction of legislative power
merely upon the so-called extra-territorial ground. He concluded:--

The true restriction is one imposed by rules of interpretation which by reference to the presumed
intention of the legislature will, notwithstanding the use of general words capable of extra-territorial
application, cut out all such applications except where necessitated by the express words of the
legislature or by necessary implication, and which, even where extra-territorial application is clearly
intended, will restrict that application to its appropriate subject matter (for example, to British
subjects or to British or colonial ships) in such manner as to harmonize colonial legislation with the
principles of international law and with the requirements of an orderly division of jurisdiction and
authority between the competent self-governing portions of the Empire. There is, it is submitted,
nothing in the decision in Macleod's Case[16] which precludes the adoption of this principle (Law
Quarterly Review (1917), vol. 33, pp. 130-131).

He also said that:--

It is to be observed that the authentic scope and limits of the authority of colonial legislatures are
determined by the statute or other instrument by which the constitution of the colony is established.
The authority so conferred is, in accordance with the settled and almost invariable formula, to make
laws "for the peace, order, and good government" of the colony. It may be, therefore, that colonial
legislation is judicially examinable with reference to the scope of the authority so conferred, and
that an enactment which is so clearly unconnected with the peace, order, and good government of
the colony that it cannot be regarded as a bona fide exercise of the subordinate legislative power so
entrusted to the legislature, may be judicially declared to be ultra vires and void (Law Quarterly
Review, vol. 33, p. 122).

This question of extra-territorial competence is of direct importance because to Australia and New
Zealand has not, as yet, been applied sec. 3 of the Statute of Westminster. By sec. 3 of the statute "it
is hereby declared and enacted that the Parliament of a Dominion has full power to make laws
having extra-territorial operation." Whilst this section is not yet in force in Australia, but has been
applied to the Dominion Parliament of Canada and to the Irish Free State and South Africa, it by no
means follows that the Parliaments of Australia and New Zealand are incompetent to give their
legislation extra-territorial operation. According to the report of the 1929 Conference on the
Operation of Dominion Legislation (Cmd. 3479) which was approved by the Imperial Conference
of 1930 (Cmd. 3717, p. 18) it was stated:--
The subject is full of obscurity and there is conflict in legal opinion as expressed in the Courts and
in the writings of jurists both as to the existence of the limitation itself and as to its extent. There are
differences in Dominion Constitutions themselves which are reflected in legal opinion in those
Dominions. The doctrine of limitation is the subject of no certain test applicable to all cases, and
constitutional power over the same matter may depend on whether the subject is one of a civil
remedy or of criminal jurisdiction. The practical inconvenience of the doctrine is by no means to be
measured by the number of cases in which legislation has been held to be invalid or inoperative. It
introduces a general uncertainty which can be illustrated by questions raised concerning fisheries,
taxation, shipping, air navigation, marriage, criminal law, deportation, and the enforcement of laws
against smuggling and unlawful immigration. The state of the law has compelled legislatures to
resort to indirect methods of reaching conduct which, in virtue of the doctrine, might lie beyond
their direct power but which they deem it essential to control as part of their self-government. It
would not seem to be possible in the present state of the authorities to come to definite conclusions
regarding the competence of Dominion Parliaments to give their legislation extra-territorial
operation; and, in any case, uncertainty as to the existence and extent of the doctrine renders it
desirable that legislation should be passed by the Parliament of the United Kingdom making it clear
that this constitutional limitation does not exist (pars. 38, 39).

The correct general principle is, I have always considered, that applied, not obscurely, in Ashbury v.
Ellis[17], namely, whether the law in question can be truly described as being for the peace, order
and good government of the Dominion concerned. Lord Hobhouse there pointed out that the
question was whether

the Act of Parliament (15 & 16 Vict. c. 72) which gives to the Legislature of New Zealand power
"to make laws for the peace, order and good government of New Zealand, provided that no such
laws be repugnant to the laws of England," does not give it power to subject to its judicial tribunals
persons who neither by themselves nor by agents are present in the colony. It is not contended that
the rules in question are repugnant to the laws of England. In fact, they are framed on principles
adopted in England. But it is said that the moment an attempt is made by New Zealand law to affect
persons out of New Zealand, that moment the local limitations of the jurisdiction are exceeded, and
the attempt is nugatory. This was put at the Bar in so broad and abstract a way, that it might be
sufficient for their Lordships to answer it by equally abstract propositions. But it will be more
satisfactory to state the material facts which have raised the question[18].

The decision was that

for trying the validity of the New Zealand laws it is sufficient to say that the peace, order, and good
government of New Zealand are promoted by the enforcement of the decrees of their own Courts in
New Zealand[19].

In this view, the fact of the Legislature's dealing with circumstances, persons or things without the
Dominion is always a relevant, but never a conclusive, element in the determination by its own
Courts of questions of legislative power. Sir John Salmond thought that the supposed limitation was
no more than a rule of construction as to the actual intention of the Legislature, and so it should
never result in a denial of power. Perhaps this view is stated a little too widely, but it closely
approximates to the present legal position.

Fortunately, the recent decision of the Judicial Committee in Croft v. Dunphy[20], which was based
on the position existing apart from the effect of the Statute of Westminster, should settle most doubts
upon the subject, and should result in confining to a very small compass indeed the supposed
territorial restrictions upon the legislative powers of the seven Parliaments of Australia. The
judgment of Lord Macmillan affirms the broad principle that the powers possessed are to be treated
as analogous to those of "a fully sovereign State," so long as they answer the description of laws for
the peace, order, and good government of the constitutional unit in question either generally or, in
the appropriate case, in respect of subject matters specified in the controlling Constitution. Lord
Macmillan said:--

But while the Imperial Parliament may be conceded to possess such powers of legislation under
international law and usage, the respondent contends that the Parliament of Canada has no such
powers. It is not contested that under the British North America Act the Dominion Legislature has
full power to enact customs laws for Canada, but it is maintained that it is debarred from
introducing into such legislation any provisions designed to operate beyond its shores or at any rate
beyond a marine league from the coast. In their Lordships' opinion the Parliament of Canada is not
under any such disability. Once it is found that a particular topic of legislation is among those upon
which the Dominion Parliament may competently legislate as being for the peace, order and good
government of Canada or as being one of the specific subjects enumerated in sec. 91 of the British
North America Act, their Lordships see no reason to restrict the permitted scope of such legislation
by any other consideration than is applicable to the legislation of a fully sovereign State[21].

The position may now be illustrated. The Legislature's intention to make its laws operate upon
matters, things and persons which are extra-territorial may be clearly expressed. Could the
Dominion of New Zealand, apart from sec. 3 of the Statute of Westminster, make punishable within
its borders an assault committed upon French soil by a Frenchman upon a Frenchman?

If this statement accurately summarizes the nature and effect of the suggested Dominion law, it
would, in my opinion, be beyond power. But this is not because non-Dominion matters are dealt
with by the law. The true reason for concluding that such a law is ultra vires the Dominion, is to be
found in answering the relevant question: Can it be regarded as a law for the peace, order, and good
government of New Zealand? In truth the conduct aimed at would bear no relation to New Zealand,
and the law could forward its welfare in no conceivable way. In a proper case, which must
necessarily be a very rare case, the Courts of the Dominion would be bound to pronounce a law
invalid upon this ground, which is firmly founded upon the very words used in the New Zealand
Constitution.

A distinction will of course have to be made in cases where a Dominion Parliament (e.g., the
Commonwealth of Australia) has authority to legislate for its peace, order, and good government,
but only with respect to enumerated subject matters. The Constitution then requires that it must be
possible to predicate of every valid law that it is for the peace, order, and good government of the
Dominion with respect to a granted subject, e.g., customs, taxation, external affairs. In such cases
the presence of non-territorial elements in the challenged law has to be considered upon a slightly
different footing, and those affirming its validity have to show not only that the Dominion has some
real concern or interest in the matter, thing or circumstances dealt with by the legislation, but that
the concern or interest is of such a nature that the challenged law is truly one with respect to an
enumerated subject matter. In such an enquiry, a valuable method of approach is indicated in the
judgment of Lord Macmillan in Croft v. Dunphy[22], where the "hovering" provisions of a Canadian
customs law were shown to bear a resemblance to customs enactments of other countries. In other
words, not only was the Dominion of Canada directly concerned in the legislation, it was concerned
because of its legislative power over the subject matter of "customs."

In the case of the Commonwealth of Australia, for instance, the Parliaments of the States have
power over the general domain of criminal law, not by direct grant, but because the subject is not (as
with the central Parliament of Canada) specifically assigned to the Parliament of the
Commonwealth. A Commonwealth criminal law containing extra-territorial elements might
therefore be deemed ultra vires, not because of the presence of such elements, but because the States
alone could enact such a law; and similarly State legislation might be invalid because the subject
matter pertained exclusively to the Commonwealth's Legislature.

In the case of the New Zealand Parliament, however, this additional complication does not arise,
because, so long as the peace, order and good government of New Zealand are in some way bound
up with the law possessing non-New-Zealand elements, the precise ground of concern need not be
described, classified, or even stated. For such Parliament has a general jurisdiction over peace, order
and good government, and there is no other competing Legislature within that Dominion.

All the leading cases can be reconciled upon these principles. The actual decision in Macleod v.
Attorney-General for New South Wales[23] turned upon a question of construction, but the statement
of Lord Halsbury that, if the widest construction were adopted, the Act would have been ultra vires,
is in direct accord with the principles. For the conduct forbidden, i.e., the commission of bigamy by
any person anywhere, was related in no conceivable way to the peace, welfare or good government
of the then Colony of New South Wales. Ashbury v. Ellis[24] itself lays down and applies the
correct principle. In Peninsular and Oriental Steam Navigation Co. v. Kingston[25], the act made
punishable was the re-entry of a vessel into Commonwealth territory with the seals of the
Commonwealth customs broken. The statute was valid as a law with respect to "customs" and the
reasoning of the Judicial Committee in Croft v. Dunphy[26] applies. It is true that in comments upon
Peninsular and Oriental Steam Navigation Co. v. Kingston, the mere re-entry of the vessel into
Commonwealth waters has often been regarded as the basis of the Commonwealth Parliament's
jurisdiction. The principle of Croft v. Dunphy[27] would treat the prohibited act, regarded in all its
aspects, a seal having been affixed by Commonwealth officers for the protection of its customs
revenue, having been broken on the high seas, and the vessel being again brought within the waters
of the Commonwealth in that condition, as being of direct and immediate concern to the
Commonwealth customs administration, and the law punishing it as being obviously a law for the
peace, order and good government of the Commonwealth with respect to customs, although part of
the "composite act" punished took place outside Commonwealth territory.

In the judgment of Lord Macmillan in Croft v. Dunphy, it was suggested that the question whether,
according to recognized principles of public international law, a Dominion's extra-territorial
legislation had exceeded its "domestic jurisdiction," so recognized in international law, might be an
important consideration in determining whether the legislation was valid. Lord Macmillan said:--

Legislation of the Imperial Parliament, even in contravention of generally acknowledged principles
of international law, is binding upon and must be enforced by the Courts of this country, for in these
Courts the legislation of the Imperial Parliament cannot be challenged as ultra vires: per Lord
Justice-General Dunedin in Mortensen v. Peters[28]. It may be that legislation of the Dominion
Parliament may be challenged as ultra vires on the ground that it is contrary to the principles of
international law, but that must be because it must be assumed that the British North America Act has
not conferred power on the Dominion Parliament to legislate contrary to these principles[29].

I read this as meaning that if, applying established rules of international law, jurisdiction could be
denied to an independent sovereign State in the circumstances of the given case, that might be a
strong, perhaps conclusive, reason for denying constitutional validity to the Dominion Parliament's
breach of international comity. But such an excess of "domestic jurisdiction" is not easily shown.
The decision of the Permanent Court of International Justice in the case of the "Lotus" shows that
the British and American view and practice of extra-territorial jurisdiction is not recognized in
public international law as the full measure of a State's jurisdiction. It is well known that the
practice of States even with respect to criminal jurisdiction varies greatly, some claiming a
jurisdiction over their subjects wherever they may be, and some claiming a jurisdiction over all
persons in respect of acts injuring or calculated to injure either the State in question or even the
nationals of that State, wherever they may be.

The extent of extra-territorial jurisdiction permitted, or rather not forbidden, by international law
cannot always be stated with precision. But, certainly, no State attempts to exercise a jurisdiction
over matters, persons or things with which it has absolutely no concern. Consequently, in actual
practice, it would be no hardship for a Dominion to have to mould its legislation in such a way that
no foreign State could establish an infringement of the rules of international law on the Dominion's
part. Quoad foreign States the Dominions are, speaking generally, bound by the rules of
international law, and it seems likely that, in a proper case, the Permanent Court of International
Justice could exercise direct jurisdiction over the Dominion at the suit of a complainant State.

It is clear therefore that, despite the passage of the Statute of Westminster 1931, the question of
"extra-territorial operation" of Dominion laws is still of great importance in relation to the
legislation of those Dominions, States and Provinces to which sec. 3 of that Act does not apply.
Moreover, whether the section operates retrospectively or not, sec. 3 cannot be used as evidence
that, until the Statute of Westminster was passed, none of the Dominions could exercise their
legislative powers so as to affect matters, things and circumstances outside their territory. For one
thing, sec. 3 says: "It is hereby declared and enacted," and the form of this provision, which springs
directly from the recommendation of the 1929 Conference on the Operation of Dominion
Legislation, is at least intended to leave open the question as to what could, apart from sec. 3, be the
lawful extra-territorial operation of any Dominion law.

It may be observed that the phrasing of sec. 3 is positive, not negative. There is accorded a direct
power to make laws having "extra-territorial operation." This power might seem to extend beyond
what was desired by those advocating the fullest and most extensive Dominion autonomy. It might
even be contended that, under the terms of sec. 3, the Courts of a Dominion to which it had been
applied could not declare ultra vires any legislation of the Dominion so long as it answered the
description of "a law having extra-territorial operation." I pass by the question whether, upon such
footing, any recognition would be accorded to such legislation by the Courts of other countries. And
it is unnecessary to consider what force there is in the possible contention that, where sec. 3 is in
force, Dominion laws having extra-territorial operation must, on that account alone, and for that
very reason, be regarded as valid though not relating in any way to the Dominion's peace, order or
good government.

In those Dominions where sec. 3 of the Statute of Westminster has not been applied "as part of the
law" the position may therefore be thus stated:--(1) The mere exhibition of non-territorial elements
in any challenged legislation does not invalidate the law. (2) The presence of such non-territorial
elements may however call attention to the necessity for enquiring whether the challenged law is
truly a law with respect to the "peace, order and good government" of the Dominion--the words
employed in the constitutional statute to define and limit the legislative power. (3) It is the duty of
the Courts of the Dominion to make this enquiry in a proper case. (4) The test is not quite, as Sir
John Salmond suggested, whether the law is a "bona fide exercise of the subordinate legislative
power" (Law Quarterly Review, vol. 33, p. 122), because the bona fides of the exercise of legislative
power cannot be impugned in the Dominion's own Courts. (5) The test is whether the law in
question does not, in some aspects and relations, bear upon the peace, order and good government
of the Dominion, either generally or in respect to specific subjects. (6) If it does not bear any
relation whatever to the Dominion, the Courts must say so and declare the law void. If it bears any
real or substantial relation, then it is a law for the peace, order and good government of the
Dominion. (7) In the latter event, it may still be ultra vires and void where the Legislature of the
Dominion has only power to legislate, under its controlling Constitution, with respect to certain
matters. If the law possessing non-Dominion elements is also of Dominion concern, but only of
concern to the local as distinct from the central, or the central as distinct from the local, Legislature,
the Courts may, in the appropriate case, have to pronounce a central or local law respectively ultra
vires, as not being a law for peace, order and good government with respect to any granted power.

Applying these principles to the present case, it is obvious that the gathering of a revenue for
Commonwealth purposes by any system of taxation is a matter of direct and vital concern to the
Commonwealth. The method of taxation adopted can only be criticized from the point of view of
hardship or political opinion. Such a criticism is irrelevant.

It may also be said with some truth that the precise connection between the present subject of
taxation and the territory of the Commonwealth is not logically dealt with and that sec. 8 (4) (a)
departs from the general scheme of taxation by reference to domicil within the territory. But
legislation which treats the value of gifts made within a short period before death as a proper subject
of inclusion in the estate for purposes of estate or death duty is clearly competent to a "fully
sovereign State." It is therefore impossible to deny that the enactment in question is a law "for the
peace, order, and good government of the Commonwealth with respect to ... Taxation" (sec. 51 (II.)
of the Commonwealth Constitution).

Therefore the second question as well as the first should be answered "Yes."

Questions answered as follows:--(1) Yes. (2) Yes. Costs, costs in the appeal.

Solicitors for the appellant, Hedderwick, Fookes & Alston.

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.

[1] (1910) A.C. 27, per Lord Gorell, at p. 39.

[2] (1898) A.C. 769.
[3] (1922) V.L.R., at p. 525; 43 A.L.T., at p. 202.
[4] [1916] HCA 62; (1916) 22 C.L.R. 367.
[5] [1920] HCA 27; (1920) 27 C.L.R. 503.
[6] (1920) 27 C.L.R., at p. 508.
[7] (1920) 27 C.L.R., at pp. 508, 509.
[8] [1920] HCA 27; (1920) 27 C.L.R. 503.
[9] (1914) A.C. 237.
[10] [1932] HCA 63; (1932) 48 C.L.R. 618.
[11] (1932) 48 C.L.R., at pp. 632, 633.
[12] (1932) 48 C.L.R., at p. 636.
[13] [1932] HCA 63; (1932) 48 C.L.R. 618.
[14] (1891) A.C. 455.
[15] (1893) A.C. 339.
[16] (1891) A.C. 455.
[17] (1893) A.C. 339.
[18] (1893) A.C., at pp. 341, 342.
[19] (1893) A.C., at pp. 344, 345.
[20] (1933) A.C. 156.
[21] (1933) A.C., at p. 163.
[22] (1933) A.C. 156.
[23] (1891) A.C. 455.
[24] (1893) A.C. 339.
[25] (1903) A.C. 471.
[26] (1933) A.C. 156.
[27] (1933) A.C. 156.
[28] (1906) 8 F. (J.C.) 93, at p. 101.
[29] (1933) A.C., at p. 164.

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