HIGH COURT OF AUSTRALIA

                                                   South Australia

                                                           Vs.

                                                   Commonwealth

                           (Latham C.J., Rich, Starke, McTiernan and Williams JJ.)

                                                     23 July 1942

Latham C.J.

The States of South Australia, Victoria, Queensland and Western Australia and their respective
Attorney-Generals sue the Commonwealth and Joseph Benedict Chifley, the Treasurer of the
Commonwealth, for a declaration that certain Acts passed by the Commonwealth Parliament are
invalid, and for an injunction restraining the Treasurer and other Ministers of State and
Commonwealth officers from putting the Acts into operation. Applications, supported by affidavits,
were made for an interlocutory injunction. Pleadings have been delivered in which, in addition to
raising defences, the defendants have demurred to the statements of claim upon the ground that the
challenged Acts are within the constitutional powers of the Parliament of the Commonwealth. It was
ordered that the cases be argued before the Full Court. All parties have consented that the
applications for interlocutory injunctions should be treated as the trials of the actions.

The challenged Acts are the following:--States Grants (Income Tax Reimbursement) Act 1942 No.
20; Income Tax (War-time Arrangements) Act 1942 No. 21; Income Tax Assessment Act 1942 No.
22; Income Tax Act 1942 No. 23.

The plaintiffs contend that these Acts constitute a scheme for the purpose of compelling the States
to abandon their constitutional right to impose taxation on incomes. The compulsion is brought
about by the imposition of a Commonwealth income tax at very high rates, rising to 18s. in the
pound upon that part of any income which exceeds £4,000. This Act, it is said, makes it practically
impossible for any State to impose a State tax upon income. The amount which, it is contemplated,
will be collected under the Commonwealth Income Tax Act (No. 23) is admitted to be approximately
equal to the total of the amounts which would have been raised by the Commonwealth and the
several States from income tax under the Commonwealth and State Acts which were in operation up
to 30th June last. The result of this Act is that the States, being practically unable to tax incomes,
will lose (taking the average) 63 per cent of their total tax revenue. The States which have imposed
high income taxes, such as Queensland and New South Wales, will lose 67 to 68 per cent of their
total taxation revenue (taken on receipts during the year ending on 30th June 1941), and the States
which have imposed relatively lower income taxes will lose a smaller proportion of such revenue--
Victoria 53 per cent and Tasmania about 47 per cent. Thus, it is urged, the Commonwealth Income
Tax Act places the States in a helpless financial position.

The Commonwealth Parliament then, it is said, purports to redress the position which it has created
by offering grants of money to the States by the States Grants (Income Tax Reimbursement) Act,
No. 20. This Act is to continue until the last day of the first financial year after the war (sec. 8). The
annual grants are made to each State upon condition of that State not imposing any tax upon
incomes in each relevant year (sec. 4). The grants are shown by the title of the Act to be
reimbursements in respect of income-tax revenue lost by the States. The amounts have been fixed by
taking the average collections of tax by each State during the years 1939-1940 and 1940-1941.
Provision is made (secs. 4 and 5) for adjustments in respect of arrears of tax which may be collected
by States under past income-tax Acts.

It is objected that these Acts constitute an attack by the Commonwealth Parliament upon the
constitutional power and function of the States to legislate for the imposition of income tax; that
taxation is not only a normal, but an essential activity of government; that the Commonwealth
Parliament has no power to impede, weaken or destroy that activity; and that the Acts are therefore
invalid.

Other objections are that the Acts involve discrimination contrary to sec. 51 (ii.) of the Constitution,
and preference contrary to sec. 99, and that the Grants Act is, by reason of the condition of
abstinence from imposing income tax attached to the grants, not a valid exercise of the power
conferred by sec. 96 of the Constitution to give financial assistance to States. These objections are,
it is contended, supported and reinforced by a consideration of the other two Acts which are
challenged. They are relied upon to demonstrate the reality of the "scheme," and, it is argued, they
fall with the scheme. But they are also the subject of further specific objections which, it is said,
show their invalidity, even if the Acts are not regarded together as constituting a single scheme.

The Income Tax (War-time Arrangements) Act 1942 No. 21 is prefaced by a preamble which recites
that the Act is enacted with a view to the public safety and defence of the Commonwealth and for
the more effective prosecution of the war in which His Majesty is engaged. Sec. 4 provides that the
Treasurer may by notice in writing addressed to any State Treasurer bring about the temporary
transfer to the Public Service of the Commonwealth of any specified officers of the State service
who have been engaged in duties which, in the opinion of the Treasurer, are connected with the
assessment or collection of taxes upon incomes. A recommendation from the Commonwealth Public
Service Board is required, and the Treasurer must in the notice state that the taking over of the
officers is, in his opinion, necessary for certain purposes connected with the war or otherwise for the
defence of the Commonwealth (sec. 4). Other sections provide for the retransfer of officers after the
Act ceases to operate, for the preservation of the rights of officers, for the control of them while
serving the Commonwealth, retirement, and superannuation rights. Sec. 11 is intended to enable the
Commonwealth, upon the Treasurer giving to the State Treasurer a notice similar to that already
mentioned, to acquire the possession and the use of "any office accommodation, furniture and
equipment specified in the notice." Sub-sec. 2 of sec. 11 provides that the compensation for such
possession and use shall be as agreed between the Commonwealth and the States or as determined
by arbitration. Sec. 13 provides for the transfer to the Commonwealth, as from the commencement
of the Act, of all returns and records relating wholly or in part to the assessment or collection of
Commonwealth income tax which are in the possession of a State. Sec. 14 is a penalty section. The
Act is to continue in operation during the same period as that prescribed for Act No. 20.

The plaintiffs object that this Act cannot be justified under any heading of Commonwealth
legislative power, and that it is a direct and deliberate attack upon the essential activities of the
States by depriving them of their income tax departments--officers, offices equipment and records,
for most of the records relate to State income tax as well as to Commonwealth income tax.

Finally, sec. 31 of the Income Tax Assessment Act 1942 No. 22 is challenged. It is at least intended
to give priority to the Commonwealth over the States in respect of payment of income tax. The
plaintiffs contend that, upon the true construction of the section, it does more than that, and that it
makes it an offence hereafter to pay any State income tax. It is argued that the Commonwealth
cannot give itself priority, and, a fortiori, cannot make it an offence to pay State income tax lawfully
imposed.

These two latter Acts, it is contended, carry out the scheme which is really sufficiently apparent in
the Tax Act and the Grants Act--a scheme to force the States, against their will, out of the income-
tax tax field and therefore to interfere with the powers and functions of State Parliaments in
legislation and of State Governments in administering the various services of the States for which
taxation revenue--determined in both quantity and quality by State Parliaments--is indispensable.

The defendants contend that the four Acts are each valid; that to describe them as a "scheme" is
merely to use a dyslogistic description which has no legal significance; that, even if they are
considered as constituting a scheme, they are nevertheless valid; and that they are properly enacted
under powers specifically conferred upon the Commonwealth Parliament by the Constitution (sec.
51 (ii.)--taxation, sec. 51 (vi.)--defence, and sec. 96--financial assistance to States).

The foregoing summary does not mention all the points which have been argued or all the questions
which have been raised--they must be dealt with in due course--but it is sufficient to indicate the
nature and importance of the legal problem which is submitted to this Court.

Nature of the Problem.--The problem for the Court is a legal problem which is unknown in
countries with a unitary form of government and a supreme legislature. It arises only when
legislative powers are divided between legislatures, so that the powers of a law-making agency are
limited. That is the case in Australia, where the Commonwealth Parliament, unlike the Parliament at
Westminster, depends for its existence and for its powers on a written Constitution. The Constitution
says that the Commonwealth Parliament shall have power to make laws with respect to certain
subjects (e.g., sec. 51 and other sections such as secs. 73, 77, 78, 79, 96, 122), that it shall have
exclusive power to make laws with respect to certain other subjects (secs. 52 and 90), and that it
shall not make certain laws at all (e.g., the limitations expressed in secs. 51 (ii.) and (iii.), 92, 99,
114, 116, 117). The Constitution of each State continues, subject to the Commonwealth Constitution
(sec. 106), and the State Parliaments continue to possess all their powers not exclusively given to
the Commonwealth Parliament by the Constitution or withdrawn from them by the Constitution
(sec. 107). If either the Commonwealth Parliament or a State Parliament attempts to make a law
which is not within its powers, the attempt fails, because the alleged law is unauthorized and is not a
law at all. When both the Commonwealth Parliament and a State Parliament have power to make
laws then, in case of inconsistency, the Commonwealth law prevails and the State law, to the extent
of the inconsistency, is invalid (sec. 109).

Common expressions, such as: "The courts have declared a statute invalid," sometimes lead to
misunderstanding. A pretended law made in excess of power is not and never has been a law at all.
Anybody in the country is entitled to disregard it. Naturally he will feel safer if he has a decision of
a court in his favour--but such a decision is not an element which produces invalidity in any law.
The law is not valid until a court pronounces against it--and thereafter invalid. If it is beyond power
it is invalid ab initio.

Thus the controversy before the Court is a legal controversy, not a political controversy. It is not for
this or any court to prescribe policy or to seek to give effect to any views or opinions upon policy.
We have nothing to do with the wisdom or expediency of legislation. Such questions are for
Parliaments and the people. It has been argued that the Acts now in question discriminate, in breach
of sec. 51 (ii.) of the Constitution, between States. The Court must consider and deal with such a
legal contention. But the Court is not authorized to consider whether the Acts are fair and just as
between States--whether some States are being forced, by a political combination against them, to
pay an undue share of Commonwealth expenditure or to provide money which other States ought
fairly to provide. These are arguments to be used in Parliament and before the people. They raise
questions of policy which it is not for the Court to determine or even to consider.

Evidence.--There is no material dispute as to facts. The affidavits which have been filed differ in
the opinions which are expressed by the deponents rather than in the facts stated. The affidavits are
important only in so far as they show the state of facts to which the various Acts apply. Most of the
facts mentioned in the affidavits can be ascertained by reference to statutes of the Commonwealth
and the States containing provisions as to taxation and estimates or records of revenue and
expenditure. These facts are conveniently summarized in the affidavits, and there is no dispute as to
them. Neither is there any dispute as to the intention of the defendants to put the Acts, alleged to be
invalid, into operation. That fact is the foundation of the plaintiffs' actions.

Admissibility of Evidence.--In order to establish the reality of the "scheme" in pursuance of which
the Acts are alleged to have been enacted, the plaintiffs sought to put in evidence the report of a
Committee on Uniform Taxation and speeches made by the defendant Treasurer in Parliament when
moving the second reading of the Bills for the four Acts. This evidence was rejected. The words of a
statute, when applied to the state of facts with which the statute deals, speak for themselves. They
express the intention of Parliament. A statute may be based upon the report of a committee or of
many committees, or upon cabinet memoranda, or upon a resolution of a political party or of a
public meeting, or upon an article in a newspaper. The intention of Parliament as expressed in the
statute cannot be modified or controlled in a court by reference to any such material. If a statute
refers to such material the case is different (Deputy Federal Commissioner of Taxation (N.S.W.) v.
W. R. Moran Pty. Ltd.[1]; and on appeal[2]). On the general question of the admissibility of reports
of commissions &c., see Salkeld v. Johnson[3]; R. v. West Riding of Yorkshire County Council[4];
Assam Railways and Trading Co. Ltd. v. Commissioners of Inland Revenue[5]. The practice as to
admitting such evidence is the same in the United States, except that the procedure of Congress in
relation to the reports of Congressional Committees has led to the admission in evidence of these
reports, but only where the language of an Act is doubtful or obscure (Willoughby on the
Constitution of the United States, 2nd ed. (1929), vol. 1, pp. 57 et seq.; Railroad Commission of
Wisconsin v. Chicago B. & Q. R. Co.[6]).

Reports of speeches in Parliament are also irrelevant and inadmissible. There are two Houses of
Parliament in the Commonwealth. They consist of one hundred and ten voting members belonging
to different parties or to no parties. Members of Parliament frequently have differing opinions, not
only as to the merits and real objects of Bills presented, but as to their meaning. Neither the validity
nor the interpretation of a statute passed by Parliament can be allowed to depend upon what
members, whether Ministers or not, choose to say in parliamentary debate. The Court takes the
words of Parliament itself, formally enacted in the statute, as expressing the intention of Parliament
(Richards v. McBride[7]; R. v. Comptroller-General of Patents[8]; Sydney Municipal Council v. The
Commonwealth[9]; Administrator-General of Bengal v. Prem Lal Mullick[10]). Possibly the case
may be different if the bona fides of Parliament or of the Crown in Parliament can be (Joseph v.
Colonial Treasurer (N.S.W.)[11]) and is challenged: See the cases referred to in Deputy Federal
Commissioner of Taxation (N.S.W.) v. W. R. Moran Pty. Ltd.[12]. An interesting example of the
irrelevance to the question of the validity of a statute of the motives, objects or intentions of the
members of a legislature is to be found in Fletcher v. Peck[13], where it was alleged that members
had been bribed and that the legislature was corrupt. In the present case no question of bona fides
arises.

The Acts as a Scheme.--In the first place it is contended by the plaintiffs that the Acts together
constitute a "scheme" directed towards an unlawful object, namely, the exclusion of State
Parliaments from the sphere of legislation upon income tax. Reference is made to Attorney-General
for Alberta v. Attorney-General for Canada[14], and to Deputy Commissioner of Taxation v.
Moran[15]. The contention that an Act which does not refer to or incorporate any other Act, and
which when considered by itself is not invalid, may be held to be invalid by reason of the enactment
of other Acts, whether valid or invalid, meets many difficulties. Parliament, when it passes an Act,
either has power to pass that Act or has not power to pass that Act. In the former case it is plain that
the enactment of other valid legislation cannot affect the validity of the first-mentioned Act if that
Act is left unchanged. The enactment of other legislation which is shown to be invalid equally
cannot have any effect upon the first-mentioned valid Act, because the other legislative action is
completely nugatory and the valid Act simply remains valid.

It is not necessary, however, in the present case to examine these questions. The Tax Act imposes a
tax at rates such that there is left little practical room for State income tax. The Grants Act shows
the intention of the Commonwealth Parliament that the Parliaments of the States should cease to tax
income. The War-time Arrangements Act shows the intention of the Commonwealth Parliament that
the Commonwealth should take over the officers and the physical means which are necessary for
administering any system of State taxation upon income. As soon as a State which refused to
abandon income tax formed a department to collect the tax the Commonwealth could take it over.
Sec. 31 of the Income Tax Assessment Act is manifestly designed to make sure that the Government
collects Commonwealth income tax, whatever may happen to any claim of a State for income tax,
but it is independent of the general "scheme" of excluding the States altogether from the income-tax
field. The intention to get rid of State income tax and of State income tax departments is clear in the
case of the three first-mentioned Acts, and if such an intention is fatal to the validity of
Commonwealth legislation it is not necessary to allege or prove any "scheme." Accordingly, in the
present case full weight can be given to the plaintiffs' case without any reference to any "scheme."
The defendants do not seek to conceal the scheme: they assert it and justify it. There is here no
question of any pretence of doing one thing under the guise of doing another. The legislation which
is attacked is not colourable--it admits its character upon its face.

The Tax Act.--The Income Tax Act is in its terms an ordinary tax Act, except that it imposes a very
high rate of tax. It may be assumed, in favour of the plaintiffs, that the rates of tax which are
imposed make it politically impossible for the States to impose further income tax. But it is not
possible for the Court to impose limitations upon the Parliament as to the rate of tax which it
proposes to impose upon the people. There is no legal principle according to which a tax of 10s. in
the pound should be held to be valid, but a tax of 11s. or 15s. or 18s. or 20s. should be held to be
invalid. Indeed, it was not disputed by the plaintiffs that, if the Tax Act had been passed without the
Grants Act, it would have been unchallengeable, whatever the result might have been in making it
impossible for a State to impose or collect income tax.

But it is said that if the object of the Tax Act is to accomplish indirectly what the Commonwealth
Parliament cannot do directly, the Act is invalid. The object is not only to collect revenue and to
make grants to the States, but to prevent the States imposing taxation upon incomes. This, as has
been said, appears to be obvious enough. But the validity of legislation is not to be determined by
the motives or the "ultimate end" of a statute. In R. v. Barger[16] there was an acute difference of
opinion as to the true nature of the legislation there in question. But all the justices agreed that,
when a legislative power was granted, neither the indirect effect of its exercise nor the motive or
object of the legislature in exercising it were relevant to the question of the validity of its exercise in
a particular case: See Barger's Case (majority judgment[17]; per Isaacs J.[18]; per Higgins J.[19]);
Radio Corporation Pty. Ltd. v. The Commonwealth[20].

The Tax Act is a law with respect to taxation. It simply exacts from citizens a contribution to the
public revenue. It contains no provisions relating to any other matter. The argument which was
successful in Barger's Case[21] (that what professed to be a Tax Act was shown by its own terms not
really to be such an Act) is not available here. The Act is merely and simply an Act imposing
taxation upon incomes. The Commonwealth power to legislate is subject to certain limitations.
There must be no discrimination between States or parts of States (Constitution, sec. 51 (ii.)), the
requirements of sec. 55 must be satisfied: See also secs. 92, 99, 114 and 117. It is clear that the Tax
Act does not infringe any of these provisions. It is argued that the Commonwealth cannot use its
taxing power so as to prevent the States exercising their taxing power. It may be conceded that the
Commonwealth Parliament has no power to prohibit a State exercising its taxing power. But there is
no such prohibition in this Tax Act. As already stated, there is no sure foothold for an argument that
the Commonwealth Parliament cannot impose so high a tax in relation to a particular subject matter
that there is no room for any additional State impost. This argument was not put by the plaintiffs.

The Commonwealth will raise by the Tax Act an amount approximately equivalent to that which
would be raised by Commonwealth and State income-tax legislation as formerly operative. The
Commonwealth proposes, under the Grants Act, to reimburse the States for lost income tax by
paying to them the sums set out in the schedule to the Act, amounting to £33,489,000. Upon the
basis of these facts it is argued for the plaintiffs that the Tax Act really raises money for State
purposes and not for Commonwealth purposes--to which the power conferred by sec. 51 (ii.) of the
Constitution is limited: See Sydney Municipal Council v. The Commonwealth[22]. But the reply to
the plaintiffs' argument is that the Constitution plainly permits the Commonwealth to raise money in
order to pay it over to or for the States: See secs. 87, 89, 93, 94, 96, 105, 105A. Payment of money
to the States is clearly a possible and proper Commonwealth purpose.

Another argument for the plaintiffs is that the Commonwealth Parliament by its Tax Act excludes
the States from necessary sources of revenue, and so itself creates the need for assistance which it
then purports to relieve by financial grants. It is urged that such grants do not fall within sec. 96 of
the Constitution. But the need for financial assistance to States not infrequently results from
Commonwealth policy as expressed in Commonwealth laws (Deputy Federal Commissioner of
Taxation (N.S.W.) v. W. A. Moran Pty. Ltd.[23]; same case on appeal[24]). Thus the mere fact that a
Commonwealth law creates a "need" in a State does not prevent the Commonwealth Parliament
from relieving the need by granting financial assistance to a State under sec. 96.

It is further argued for the plaintiffs that the object of the Tax Act, at least to the extent of an amount
of £33,489,000 of the revenue to be raised thereby, is to raise money to meet the payment of that
amount under the Grants Act; that the Grants Act is invalid for reasons which will be referred to
later; that therefore the Tax Act is designed to raise money for an unconstitutional purpose and
accordingly is invalid. I assume for the purpose of considering this argument that the Grants Act is
for some reason invalid.

In fact the money raised by the Tax Act is not earmarked in any way. It is doubtful whether
Commonwealth revenue can be earmarked except at the point of expenditure (i.e., not as revenue)
by an appropriation Act--and there is no appropriation section in the Tax Act. The Constitution, sec.
81, provides: "All revenues or moneys raised or received by the Executive Government of the
Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of
the Commonwealth in the manner and subject to the charges and liabilities imposed by this
Constitution." Sec. 83 provides that no money shall be drawn from the Treasury of the
Commonwealth except under appropriation made by law. Separate constitutional provisions apply to
appropriation Acts (secs. 54 and 56) and to laws imposing taxation (sec. 55). Sec. 54 provides that:
"The proposed law which appropriates revenue or moneys for the ordinary annual services of the
Government shall deal only with such appropriation." Sec. 55 provides that: "Laws imposing
taxation shall deal only with the imposition of taxation, and any provision therein dealing with any
other matter shall be of no effect."

Thus no provision imposing taxation can be included in an appropriation Act and no appropriation
of money can be made by any Act imposing taxation. All taxation moneys must pass into the
Consolidated Revenue Fund (sec. 81), where their identity is lost, and whence they can be taken
only by an appropriation Act. An appropriation Act could provide that a sum measured by the
receipts under a particular tax Act should be applied to a particular purpose, but this would mean
only that the sum so fixed would be taken out of the general consolidated revenue. Thus there can
be no earmarking in the ordinary sense of any Commonwealth revenue.

In this case, however, no attempt has been made to provide that any moneys received under the Tax
Act shall be applied towards meeting the payments under the Grants Act. Neither Act contains any
such provision. The appropriation made by the Grants Act is made out of the Consolidated Revenue
Fund (Grants Act, sec. 7).

It is not necessary in this case to consider the general question whether the Commonwealth
appropriation power is limited so that some appropriations would be invalid, not because of an
infringement of sec. 54 of the Constitution, but because they were applicable to some unauthorized
object. But, even if it can be assumed that an appropriation can be invalid (as here contended with
reference to the Grants Act), such invalidity cannot reflect back upon any tax Act so as to make it
invalid. Commonwealth Government receipts consist of proceeds of taxation and loans and of
payments for services, and they all go into one fund (Constitution, sec. 81). Suppose the
Commonwealth Government were, under invalid legislation, or without any pretended legislative
justification, to make a payment of one million pounds or one thousand pounds to a person who had
no right to receive it. Can it be contended that because the payment might have been made out of
receipts from income tax that therefore the income-tax laws of the Commonwealth are invalid? The
argument might with equal force be applied to the customs tariff, or the Estate Duties Act, or the
Land Tax Act, or to any Act which brings in the money some of which has been or may have been
unlawfully expended. It is impossible to accept a contention the necessary result of which, if
logically applied, would be that any unauthorized expenditure of Commonwealth money would
invalidate all the Acts under or by virtue of which moneys come into the consolidated revenue. Thus
the objections made to the Tax Act specifically must be held to fail.

The Grants Act.--It is now necessary to deal with the far-reaching and fundamental general
objection which is made to the Tax Act considered in association with the other Acts, but which is
particularly directed against the Grants Act.

This objection is based upon the following principle which, it is argued, applies to all
Commonwealth legislative powers, namely--the Commonwealth cannot direct its legislative powers
towards destroying or weakening the constitutional functions or capacities of a State. (A
corresponding rule should, it is said, be applied in favour of the Commonwealth as against the
States.) In another form the principle is said to be that the Commonwealth cannot use its legislative
powers to destroy either "the essential governmental functions" or "the normal activities" of a State.

Before considering sec. 4, which is the main provision of the Grants Act, reference may be made to
an objection to the validity of sec. 6. This section enables the Treasurer of the Commonwealth,
subject to a maximum limit to be stated in a recommendation of the Commonwealth Grants
Commission, to increase the grants to the States. It is objected by the plaintiffs that this provision is
not a valid exercise of the power given to the Commonwealth Parliament to grant financial
assistance to States under sec. 96 of the Constitution, because it involves an unconstitutional
delegation to the Treasurer of legislative power. This objection, however, is answered by Deputy
Federal Commissioner of Taxation (N.S.W.) v. W. R. Moran Pty. Ltd.[25].

The principal provision of the Grants Act is sec. 4, which is in the following terms: "In every
financial year during which this Act is in operation in respect of which the Treasurer is satisfied that
a State has not imposed a tax upon incomes, there shall be payable by way of financial assistance to
that State the amount set forth in the Schedule to this Act against the name of that State, less an
amount equal to any arrears of tax collected by or on behalf of that State during that financial year."

Upon this provision the following preliminary comments may be made:--

      (a)

      The Act does not purport to repeal State income-tax legislation. The Commonwealth
      Parliament cannot do this. It cannot repeal an Act which it has no power to enact: See
      Attorney-General for Ontario v. Attorney-General for the Dominion[26]; Great West Saddlery
      Co. v. The King[27]. Plainly the Commonwealth Parliament could not enact separate income-
      tax Acts for separate States. Nor can it repeal such Acts enacted by the States.

      (b)

      The Grants Act does not require, in order that a State should qualify for a grant, that the
      State--or rather the State Parliament--should abdicate, or purport to abdicate, its power to
      impose taxes upon incomes. A State Parliament could not bind itself or its successors not to
      legislate upon a particular subject matter, not even, I should think, by referring a matter to the
      Commonwealth Parliament under sec. 51 (xxxvii.) of the Constitution--but no decision upon
      that provision is called for in the present case. The grant becomes payable if the Treasurer is
      satisfied that a State has not in fact imposed a tax upon incomes in any particular year during
      the operation of the Acts.

      (c)

      The Act does not purport to deprive the State Parliament of the power to impose an income tax.
      The Commonwealth Parliament cannot deprive any State of that power: see Constitution, secs.
      106, 107. Notwithstanding the Grants Act a State Parliament could at any time impose an
      income tax. The State would then not benefit by a grant under the Act, but there is nothing in
      the Grants Act which could make the State income-tax legislation invalid.
      (d)

      The Grants Act offers an inducement to the State Parliaments not to exercise a power the
      continued existence of which is recognized--the power to impose income tax. The States may
      or may not yield to this inducement, but there is no legal compulsion to yield.

The Commonwealth may properly induce a State to exercise its powers (e.g. the power to make
roads: See Victoria v. The Commonwealth[28]) by offering a money grant. So also the
Commonwealth may properly induce a State by the same means to abstain from exercising its
powers. For example, the Commonwealth might wish to exercise the powers given by the
Constitution, sec. 51 (xiii.) and (xiv.) to legislate with respect to banking, other than State banking,
and insurance, other than State insurance. The Commonwealth might wish to set up some Federal
system of banking or insurance without any State competition. If the States were deriving revenue
from State banking or State insurance, they might be prepared to retire from such activities upon
receiving what they regarded as adequate compensation. The Commonwealth could properly, under
Commonwealth legislation, make grants to the States upon condition of them so retiring. The States
could not abdicate their powers by binding themselves not to re-enter the vacated field, but if the
Commonwealth, aware of this possibility, was prepared to pay money to a State which in fact gave
up its system of State banking or insurance, there could be no objection on this ground to the
validity of the Commonwealth law which authorized the payment.

But the position is radically different, it is urged, if the so-called inducement practically amounts to
coercion. Admittedly the Commonwealth Parliament could not pass a law compelling a State to
surrender the power to tax incomes or prohibiting the exercise of that power by a State. Equally, it is
said, the Commonwealth cannot lawfully make an offer of money to a State which, under the
conditions which actually exist, the State cannot, on political or economic grounds, really refuse.

This identification of a very attractive inducement with legal compulsion is not convincing. Action
may be brought about by temptation--by offering a reward--or by compulsion. But temptation is
not compulsion. A person whose hand is physically propelled by another person against his will so
that it strikes a blow is not guilty of assault. But it would be no defence to allege that he really could
not help striking the blow because he was offered £1,000 for doing it.

This question has been considered in the Supreme Court of the United States of America: See
Massachusetts v. Mellon[29], where it was held that a Federal statute making money available to
States which were willing to co-operate with Congress in reducing maternal and infant mortality
imposed no obligation, but simply extended "an option which the State is free to accept or reject."
On the other hand, in United States v. Butler (The Hoosac Mills Case, a New Deal case)[30] it was
said that an offer to a farmer the refusal of which may involve financial ruin to him amounts to
coercion--"coercion by economic pressure. The asserted power of choice is illusory." Stone J.,
dissenting with Brandeis and Cardozo JJ., took a contrary view: "Threat of loss, not hope of gain, is
the essence of economic coercion"[31]. A somewhat similar question, but in a different form, arose
in Carter v. Carter Coal Co.[32], where the majority took the view that an offer of exemption from
a penalty amounted to compulsion. The authority of the latter two cases is, however, greatly
diminished, if not destroyed, by the more recent case of Steward Machine Co. v. Davis[33]. A
Federal law provided for a rebate to taxpayers of up to 90 per cent of a Federal tax if the taxpayer
contributed to a State unemployment scheme approved by the Secretary of the Federal Treasury. It
was urged that this was an unconstitutional attempt to coerce the States into enacting unemployment
legislation approved by the Federal Government--that Government itself having no power to
legislate upon the subject of unemployment. The contention was rejected. It was said:--"Every
rebate ... is in some measure a temptation. But to hold that motive or temptation is equivalent to
coercion is to plunge the law in endless difficulties"[34]. Sutherland J. (dissenting) agreed in this
view:--"I agree that the States are not coerced by the Federal legislation into adopting
unemployment legislation. The provisions of the Federal law may operate to induce the State to pass
an employment law if it regards such action to be in its interest. But that is not coercion"[35]. Thus
the now prevailing opinion of the Supreme Court of the United States is in accord with the view
which has been stated above. The Grants Act does not compel the States to abandon their legislative
power to impose a tax upon incomes. States which do not abstain from imposing income tax cannot
be said to be acting unlawfully. There is no command that they shall not impose such a tax.

State Functions and Capacities.--It is clear, however, that the Grants Act is intended to bring about
the result that the State shall not impose such a tax. The Act therefore must meet the challenge of
the plaintiffs that the Commonwealth cannot direct its legislative powers against the constitutional
functions or capacities--against the essential functions or the normal activities--of a State.

This statement reminds one who has followed the development of Australian constitutional law of
"the rule in D'Emden v. Pedder1(1904) [1904] HCA 1; 1 C.L.R. 91.", which was stated in the
following terms: "When a State attempts to give to its legislative or executive authority an operation
which, if valid, would fetter, control, or interfere with, the free exercise of the legislative or
executive power of the Commonwealth, the attempt, unless expressly authorized by the
Constitution, is to that extent invalid and inoperative"[37]. A corresponding rule was held to apply
against the Commonwealth in favour of the States in the Railway Servants' Case[38].

Thus the doctrine of the reciprocal immunity of Federal and State instrumentalities was introduced.
The latter case was overruled in the Engineers' Case[39], and the exercise of Commonwealth
legislative powers was held not to be subject to any implied prohibition prescribing non-interference
with State instrumentalities, though, as pointed out in the Engineers' Case[40], and again in West v.
Commissioner of Taxation (N.S.W.)[41] (per Dixon J.[42]; per Evatt J.[43]), the nature of the State
power or Commonwealth power concerned must be considered in each case. In the Engineers'
Case[44] the rule in D'Emden v. Pedder[45], distinctly stated as a limitation upon the exercise of the
powers of the States only, was held to be sound on the basis of sec. 109 of the Constitution, which
provides that: "When a law of a State is inconsistent with a law of the Commonwealth, the latter
shall prevail, and the former shall, to the extent of the inconsistency, be invalid."

Questions relating to the non-statutory prerogative were left open in the Engineers' Case[46]. No
question affecting such prerogative arises in the present case.

It is argued for the plaintiffs that the authorities as they now stand leave it open to the Court to hold
that, while there is no general principle of exemption of State instrumentalities from the exercise of
Federal power, the Federal nature of the Constitution, involving as it does the continued existence of
the States, does involve the principle that the Commonwealth cannot use its legislative powers to
destroy or weaken the constitutional functions or capacities or to control the normal activities of the
States. It will be convenient to quote certain passages from cases upon which the plaintiffs rely
which will show the plaintiffs' contention in its full strength.

R. v. Barger.
"It is an inherent consequence of the division of powers between governmental authorities that
neither authority is to hamper or impede the other in the exercise of their respective powers" (R. v.
Barger[47], per Isaacs J.). It should be observed, however, that this statement is completed by the
following important addition:--"But that doctrine has no relation to the extent of the powers
themselves; it assumes the delimitation aliunde. It is contrary to reason to shorten the expressly
granted powers by the undefined residuum. As well might the precedent gift in a will be limited by
first assuming the extent of the ultimate residue"[48]. This proposition anticipates the decision in the
Engineers' Case[49] that express Commonwealth powers cannot be limited by reserved State
powers.

Pirrie v. McFarlane.

"I can find" (in certain Canadian cases) "no principle governing this case, unless it be the natural
and fundamental principle that, where by the one Constitution separate and exclusive governmental
powers have been allotted to two distinct organisms, neither is intended, in the absence of distinct
provision to the contrary, to destroy or weaken the capacity or functions expressly conferred on the
other. Such attempted destruction or weakening is prima facie outside the respective grants of
power" (Pirrie v. McFarlane[50], per Isaacs J., quoted by Dixon J. in West v. Commissioner of
Taxation (N.S.W.)[51]). In this passage emphasis is placed upon the grant of exclusive powers to
both Dominion and Provinces--a feature which is absent from the Commonwealth Constitution.

West v. Commissioner of Taxation.

"It must at least be implied in the Constitution, as an instrument of Federal Government, that neither
the Commonwealth nor a State legislature is at liberty to direct its legislation toward the destruction
of the normal activities of the Commonwealth or States. Such a principle is not inconsistent with the
rejection by the Engineers' Case1(1920) [1920] HCA 54; 28 C.L.R. 129. of the earlier doctrine of
immunity of instrumentalities" (per Evatt J. in West v. Commissioner of Taxation (N.S.W.)[53]).

"It is quite erroneous to regard the Engineers' Case1(1920) [1920] HCA 54; 28 C.L.R. 129. as
having established a new and valid constitutional principle, under which, either by direct declaration
as to the termination of specified State legislation, or as to the States' legislative power, or by
indirectly creating conditions or qualities under Commonwealth legislation which will achieve the
same objectives, the Commonwealth Parliament is enabled, by the exercise of its own legislative
power, to rid itself of any State legislative interference or impediment. This constitutional principle
or doctrine is a dangerous feature of the Engineers' Case1(1920) 28 C.L.R. 129. and any proposed
application of it should be most carefully watched" (also per Evatt J. in the same case[56]).

Caron v. The King.

"In Great West Saddlery Co. v. The King4(1921) 2 A.C. 91. ... a general principle was laid down
that no Provincial legislature could use its special powers as an indirect means of destroying powers
given by the Parliament of Canada. By parity of reason the Parliament of Canada could not exercise
its power of taxation so as to destroy the capacity of officials lawfully appointed by the Province"
(Caron v. The King[58]).

James v. The Commonwealth.

"The powers of the States were left unaffected by the Constitution except in so far as the contrary
was expressly provided; subject to that each State remained sovereign within its own sphere. The
powers of the State within those limits are as plenary as are the powers of the Commonwealth"
(James v. The Commonwealth[59]).

The discussion of the question may begin with a consideration of the last-quoted passage. It is
unnecessary in the present case--and probably unnecessary in any purely legal controversy--to
consider in what sense a State which is part of a Federal Commonwealth under the British Crown
can be said to be "a sovereign State": See The Commonwealth v. New South Wales[60], and West v.
Commissioner of Taxation (N.S.W.)[61]. The legislative powers of the States depend upon their
Constitutions, which, speaking generally, give power to legislate for the peace, order and good
government of the States. There are certain limitations upon these powers:--(a) They must not be
exercised to pass laws which are repugnant to applicable Imperial laws: See Colonial Laws Validity
Act 1865, sec. 2. (b) Some powers (Constitution, sec. 107) which State Parliaments would otherwise
possess have been exclusively vested in the Parliament of the Commonwealth (see, e.g., secs. 52,
90) or withdrawn from the Parliaments of the States (see, e.g., such prohibitions as are contained in
secs. 92, 114, 115, 117). (c) Laws of the State which are inconsistent with laws of the
Commonwealth are invalid to the extent of the inconsistency (sec. 109). Thus if both the
Commonwealth Parliament and the State Parliaments have power to pass a law with respect to a
certain subject--e.g., bankruptcy--the Commonwealth law prevails in the event of inconsistency.
The powers of the States are, it is true, "plenary within their limits," but those limits may be
determined in many matters by Commonwealth laws which may make State laws invalid.

The Commonwealth Parliament is limited in its legislation by the grants of power made by the
Constitution and by the prohibitions contained in the Constitution, as well as by the Colonial Laws
Validity Act, (the Statute of Westminster 1931 not having been adopted by the Commonwealth). But
no law which is within a Commonwealth power can be rendered invalid by any State law, though a
State law which, apart from action by the Commonwealth Parliament, would be valid, may be
invalid by reason of inconsistent provisions in a Commonwealth law (sec. 109).

In this case the plaintiffs do not rely on any express provision in the Commonwealth Constitution
for the purpose of showing that the Tax Act and the Grants Act, as well as the other Acts considered
together with them, are invalid. They rely upon the alleged implied prohibition as to non-
interference by the Commonwealth with State constitutional functions, capacities or activities. They
point to secs. 106 and 107 of the Constitution, which have already been quoted. These sections,
however, do not confer any powers upon a State or upon a State Parliament. They preserve existing
powers, but, as to State Constitutions (sec. 106) "subject to the" (Commonwealth) "Constitution,"
and, as to State legislative powers, (sec. 107) only after withdrawals and exclusions effected by the
Constitution, and then subject to the effect of overriding Commonwealth laws where the
Commonwealth Parliament has power to legislate (sec. 109). These provisions cannot be relied
upon to limit by either express or implied prohibition any provision conferring powers upon the
Commonwealth. They do make it clear that the Commonwealth possesses only the powers granted
by the Constitution. But they do not limit the sphere or restrict the operation of the powers which
are so granted.

The Engineers' Case[62] did not deny the existence of implied powers or prohibitions (see the
report[63]). Should then the particular implication for which the plaintiffs contend be made upon
some ground other than the express terms of secs. 106 and 107 of the Constitution?

In the first place it may be admitted that revenue is essential to the existence of any organized State,
and that there cannot be either reliable or sufficient revenue without power of taxation. The power
of taxation may fairly be said to be an essential function of a State.

But this admission states a universal opinion. There is no universal or even general opinion as to
what are the essential functions, capacities, powers, or activities of a State. Some would limit them
to the administration of justice and police and necessary associated activities. There are those who
object to State action in relation to health, education, and the development of natural resources. On
the other hand, many would regard the provision of social services as an essential function of
government. When Lord Watson said in Coomber v. Justices of Berks[64] that "the administration of
justice, the maintenance of order, and the repression of crime are among the primary and inalienable
functions of a constitutional government," he was not purporting to give an exhaustive definition of
the functions of government. In a fully self-governing country where a parliament determines
legislative policy and an executive government carries it out, any activity may become a function of
government if parliament so determines. It is not for a court to impose upon any parliament any
political doctrine as to what are and what are not functions of government, or to attempt the
impossible task of distinguishing, within functions of government, between essential and non-
essential or between normal or abnormal. There is no sure basis for such a distinction. Only the firm
establishment of some political doctrine as an obligatory dogma could bring about certainty in such
a sphere, and Australia has not come to that.

Thus the principle for which the plaintiffs contend must be applied, if at all, in protection of all that
a State chooses to do, and it must mean that Commonwealth legislation cannot be directed to
weaken or destroy any State function or activity whatsoever.

But it cannot be denied that Commonwealth legislation may be valid though it does in fact weaken
or destroy, and even is intended to weaken or destroy, some State activity. Sec. 109 shows that this
must be so in many cases. Commonwealth laws have in fact put an end to the existence of State
Courts of Bankruptcy and State Patent, Trade Mark and Copyright Departments. The
Commonwealth laws are not invalid on that account. They have produced the results stated just
because they are valid.

It is true that the Commonwealth Parliament has no power to make laws with respect to the capacity
and functions of a State Parliament. It has already been stated that the Commonwealth Parliament
could not pass a law to prohibit a State Parliament from legislating in general or from legislating
upon some particular subject matter. But this limit upon the power of the Commonwealth
Parliament does not arise from any prohibition or limitation to be implied from the Constitution. It
is simply the result of the absence of power in the Commonwealth Parliament to pass laws with
respect to the functions or powers of State Parliaments. The Commonwealth Parliament cannot
legislate with respect to any subject whatever unless a power to do so is conferred on it by the
Constitution. No power such as that mentioned is given by the Constitution to the Parliament.

But the Acts in question are not laws with respect to State functions. They do not command or
prohibit any action by the State or by the State Parliament.

Indirect Effects of Laws.--A law may produce an effect in relation to a subject matter without being
a law with respect to that subject matter. Questions of motive and object are irrelevant to the
question of the true nature of a law. The nature (or "substance" if that word is preferred) of a law is
to be determined by what it does, not by the effect in relation to other matters of what the law does.
A prohibition of import or a very high duty in a customs tariff may bring about the closing of
business enterprises in a State. But the tariff is not a law with respect to those enterprises. Similarly
a State law may prohibit the carrying on of occupations with the result that they are necessarily
abandoned, with perhaps great consequential loss to the Commonwealth in customs duties or
income-tax receipts. But the State law does not for this reason become a law with respect to customs
duties or income tax. The true nature of a law is to be ascertained by examining its terms and,
speaking generally, ascertaining what it does in relation to duties, rights or powers which it creates,
abolishes or regulates. The question may be put in these terms: "What does the law do in the way of
changing or creating or destroying duties or rights or powers?" The consequential effects are
irrelevant for this purpose. Even though an indirect consequence of an Act, which consequence
could not be directly achieved by the legislature, is contemplated and desired by Parliament, that
fact is not relevant to the validity of the Act (R. v. Barger[65]; Osborne v. The Commonwealth[66];
Attorney-General for Queensland v. Attorney-General for the Commonwealth[67]; Sonzinsky v.
United States[68], and see note in the Lawyers' Edition[69]).

This principle should be remembered when it is said that a Parliament of limited powers cannot do
indirectly what it cannot do directly. This proposition is of value when (as has not infrequently
happened in Canada) it is contended that an Act is colourable in character in that, under the guise or
pretence of doing something permitted, it is in reality doing something prohibited or beyond power.
The relevant Canadian cases generally deal with the difficulties arising from the grant of exclusive
powers to both Dominion and Provinces. The emphasis placed upon this point may be noted in John
Deere Plow Co. Ltd. v. Wharton[70]; Great West Saddlery Co. v. The King[71]; Attorney-General
for Ontario v. Reciprocal Insurers[72]. When the areas of such competing powers overlap, and the
challenged law is, for example, both a law relating to insurance (Provincial power) and to crime
(Dominion power), a court must make a choice as to the category to which the law should be
assigned: See, e.g., Attorney-General for Ontario v. Reciprocal Insurers[73]; In re Insurance Act of
Canada[74], where the decision against the Dominion was assisted by the fact that the Dominion
Parliament has sought to give itself power by a palpably "false definition"--a provision that a
company should be deemed to "immigrate" into Canada if it sent to Canada a document appointing
an agent there: see the report[75]. Upon this difficult question the Privy Council has ultimately
decided to abstain from laying down any general principle, leaving the question of ultra vires to "be
determined in each case as it arises, for no general test applicable to all cases can safely be laid
down" (Attorney-General for Alberta v. Attorney-General for Canada[76]). The Commonwealth
Constitution does not confer any exclusive powers upon the States. Subject to the Constitution the
States are left with powers not given exclusively to the Commonwealth or withdrawn from the
States (secs. 106, 107). Sec. 109 then gives to any Commonwealth law, whether made under an
exclusive or under a concurrent power, overriding operation over any State law. Thus the difficulties
of choosing between two heads of power, stated to be exclusive, but in fact overlapping, do not arise
in Australia.

The problem, as explained in the Engineers' Case[77], is the different, though not always easy,
problem of deciding whether a particular Commonwealth law falls within a head of Commonwealth
power: if it does, it is immaterial that the States may also have power to legislate on the matter. If
the law falls within the Commonwealth power, the law is valid and fully operative, notwithstanding
any State law. Barger's Case[78] is an illustration of the difficulty of deciding whether a particular
law really does fall within a granted power, but, as already pointed out, Barger's Case[79] in all the
judgments rejects considerations of indirect consequences as being irrelevant material.

If the validity of a State law is in question, the Court has to decide whether the law is a law for the
peace, order and good government of a State: if not (as if it purported to prohibit the
Commonwealth Parliament from exercising its powers) it is invalid because beyond State power. If
not beyond State power for this reason, it may be repugnant to applicable Imperial law (Colonial
Laws Validity Act 1865, sec. 2) or trench upon Commonwealth exclusive power, or be opposed to a
prohibition in the Constitution (e.g., secs. 92, 114), or be inconsistent with a valid Federal law (sec.
109). In any of these cases it is invalid. In none of the instances mentioned can any consideration of
indirect consequences be relevant.

When a power is defined by reference to purpose, other considerations arise (Deputy Federal
Commissioner of Taxation (N.S.W.) v. W. R. Moran Pty. Ltd.[80]). So also if there were a prohibition
against attaining a result by any method whatever. If, for example, the Commonwealth Constitution
contained a provision that no Commonwealth law should by any means bring about the result of a
discrimination between States, the indirect consequential effects of the law would have to be
examined. But the Constitution contains no such provision. For example, taxation laws may not
discriminate between States (sec. 51 (ii.)); laws of trade, commerce or revenue may not give
preference to a State (sec. 99). These provisions affect only laws of the stated character. Thus there
may be discrimination between States and preferences to States under sec. 96--grants to States--
because that section is not subject to any limitation with respect to discrimination (Deputy Federal
Commissioner of Taxation (N.S.W.) v. W. R. Moran Pty. Ltd.[81]).

Thus, although the Commonwealth Parliament cannot validly pass laws limiting the functions of
State Parliaments--and vice versa--the Tax Act and the Grants Act are not invalid on that ground.
They do not give any command or impose any prohibition with respect to the exercise of any State
power, legislative or other. The Tax Act simply imposes Commonwealth taxation, and is authorized
by sec. 51 (ii.) of the Constitution. The Grants Act authorizes payments to States which choose to
abstain from imposing income tax, and is valid by reason of sec. 96 of the Constitution, unless it is
bad as involving some prohibited discrimination or preference. It is now necessary to deal
specifically with that objection.

Discrimination.--Sec. 96 provides that: "During a period of ten years after the establishment of the
Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant
financial assistance to any State on such terms and conditions as the Parliament thinks fit." Plainly
under this provision financial assistance could be given to a single State only. Thus variation in
amounts given to different States is permissible. The section contains no express or implied
prohibition against any kind of discrimination: See references to Moran's Case[82]. Thus it is no
objection to the Grants Act that States which abandon income tax are given a grant while those who
retain income tax get nothing.

So also the indirect effect of varying grants upon the fortunes of taxpayers of different States is an
irrelevant circumstance. The Tax Act itself is a general Act, applying to all persons in all States
without discrimination. The States, not the taxpayers, receive varying amounts under the Grants
Act. As taxpayers in some States will this year pay more in Commonwealth income tax than they
did last year in both Commonwealth and State income tax, and taxpayers in other States will pay
less than last year, it is said that the Tax Act, read with the Grants Act, discriminates between States.
But a comparison of this year with last year or any past year is not to the point. If the
Commonwealth had not enacted the challenged Acts, no-one can say what the Commonwealth or
State rates of tax would have been this year. The question whether these facts unlawfully
discriminate between States cannot be answered by any consideration of the actual position of
taxpayers under past legislation (which was alterable by one Commonwealth and six State
Parliaments severally) or by a speculation as to the taxation which would probably have been
imposed by Commonwealth and States if the Acts in question had not been passed. Further, as
already pointed out, the proceeds of the Tax Act simply go into general consolidated revenue,
together with the receipts from other taxes and other moneys, such as the revenue derived from the
post office. Then a portion of this general fund is applied, to the extent of £33,489,000, in making
grants to States, if the States are willing to accept them. There is no reduction of Commonwealth
income tax to taxpayers in particular States.

It is true that in Moran v. Deputy Commissioner of Taxation[83] the Privy Council pronounced a
warning that possibly (no decision was given on the question) a grant under sec. 96 might be used
for the purpose of effecting discrimination in regard to taxation--"under the guise or pretence of
assisting a State with money." It may be that, with a very misguided Parliament, such a case is
perhaps conceivable. If the proceeds of a tax could be earmarked and if such proceeds were then
distributed in whole or in part among the States upon a discriminatory basis the case apparently
contemplated by the Privy Council would arise. Reference has however already been made to the
difficulties which, under the Commonwealth Constitution, stand in the way of earmarking
Commonwealth revenue in any respect. In the Hoosac Mills Case[84] the Supreme Court of the
United States considered such a case as that suggested. The Agricultural Adjustment Act was there
held invalid because the proceeds of a tax were identified with a purpose to which the Act was
applied, that purpose being held to be an unlawful purpose. It was held to be unlawful because it
involved an invasion by the Federal Government of the reserved powers of the States[85]. This
decision depended upon the doctrine of immunity of State instrumentalities which, in Australia, was
rejected in the Engineers' Case[86]--See the discussion of this case in The Supreme Court and the
National Will by Dean Alfange, pp. 180 et seq. If the proceeds of a Commonwealth tax were as such
devoted to some unlawful purpose, the case contemplated by the Privy Council might arise and it
would be similar to the Hoosac Mills Case[87]. But it will not be easy to find a case where it can
properly be held that an appropriation Act making grants to States is invalid because it involves an
infringement of the provision that Acts with respect to taxation shall not discriminate between States
or parts of States.

The Tax Act now under consideration does not so discriminate. It imposes the same tax at the same
rates upon all persons in all States throughout Australia. It does not make any discrimination
whatever between States--it does not even refer to any State. The Act is also a law of revenue, and
therefore must not give preference to any State (sec. 99). The Act does not give preference to any
State. The Grants Act is an Act dealing with expenditure--an appropriation Act. It does draw
distinctions between States. There is no constitutional reason why it should not do so. There never
has been and there cannot be uniformity in payments made by the Commonwealth in or to States or
persons in States. Discrimination in expenditure between States is found in every Commonwealth
budget and in many appropriation Acts. It has never been argued either that such differentiation
should be avoided or that it could be avoided.

Conclusion as to Tax Act and Grants Act.--Thus the objections to the Tax Act and the Grants Act
fail, whether those Acts are considered separately or as part of a scheme to bring about the
abandonment by the States of the raising of revenue by taxation of incomes.

It is perhaps not out of place to point out that the scheme which the Commonwealth has applied to
income tax of imposing rates so high as practically to exclude State taxation could be applied to
other taxes so as to make the States almost completely dependent, financially and therefore
generally, upon the Commonwealth. If the Commonwealth Parliament, in a grants Act, simply
provided for the payment of moneys to States, without attaching any conditions whatever, none of
the legislation could be challenged by any of the arguments submitted to the Court in these cases.
The amount of the grants could be determined in fact by the satisfaction of the Commonwealth with
the policies, legislative or other, of the respective States, no reference being made to such matters in
any Commonwealth statute. Thus, if the Commonwealth Parliament were prepared to pass such
legislation, all State powers would be controlled by the Commonwealth--a result which would
mean the end of the political independence of the States. Such a result cannot be prevented by any
legal decision. The determination of the propriety of any such policy must rest with the
Commonwealth Parliament and ultimately with the people. The remedy for alleged abuse of power
or for the use of power to promote what are thought to be improper objects is to be found in the
political arena and not in the Courts.

Income Tax (War-time Arrangements) Act 1942.--The provisions of this Act have already been
stated. Under this Act, if it is valid, the Commonwealth can, during the war, and a stated period
thereafter, take over all the personnel, present or future, of any State income tax department, with its
office accommodation, present or future, and office equipment, present or future. Thus the operation
of the Act would make the existence of such a department impossible.

Compensation for the possession and use of office accommodation, furniture and equipment is to be
determined, in default of agreement, by an arbitrator appointed by the Governor-General (sec. 11
(3)). No provision is made for compensation in respect of returns and records (sec. 13). The
Commonwealth Parliament has power to make laws with respect to the acquisition of property on
just terms from any State or person for any purpose in respect of which the Parliament has power to
make laws (Constitution, sec. 51 (xxxi.)). If this is the only power of the Parliament to legislate for
the acquisition of property, it may be questioned whether the determination of compensation by an
arbitrator appointed by the acquiring Commonwealth satisfies the requirement of just terms. The
taking over of all returns and records, even with a right of access by the States (which is provided
for by sec. 13), but without any compensation, might well be held not to be "on just terms." These
questions, however, were not argued.

Commonwealth and State income taxes have been collected by a single staff in each State under
agreements made between the Commonwealth and the States under the Commonwealth Income Tax
Collection Act 1923-1940. The taxes have been collected by the Commonwealth in Western
Australia, and in the other States by the States. The actual agreements are not before the Court. Sec.
12 of the War-time Arrangements Act provides that the agreements shall, notwithstanding any
provisions contained in them, be suspended as from a date fixed by proclamation until the Act
ceases to operate. No argument was heard as to the power of the Commonwealth Parliament to
suspend these agreements. Probably they are political arrangements not creating legal obligations
between the parties and are terminable at the will of either party. The effect of the application of the
War-time Arrangements Act would be that the same staff or some of the same staff would continue
to do the same work as if the Act had not been passed, but under Commonwealth control in all
States instead of only in Western Australia. Any saving of manpower brought about by the
simplification resulting from the abolition of future State income tax could be effected whether or
not the War-time Arrangements Act was applied.

It is conceded that, under a general legislative provision, such as the Defence Act or reg. 4 of
Statutory Rule No. 77 of 1942 (regulations under the National Security Act 1939-1940), the
Commonwealth can in time of war, compel the services of any person (including State public
servants) for any purpose connected with the defence of the country. But it is a different thing to
select a particular class of persons as such and to compel their services only. For example, though
under a defence Act the Commonwealth Government can call up citizens for service in the military
forces, it would be quite a different thing to pass a law imposing liability to service upon the
residents of certain specified States only. Such a law would be prohibited by sec. 117 of the
Constitution, which provides that: "A subject of the Queen, resident in any State, shall not be
subject in any other State to any disability or discrimination which would not be equally applicable
to him if he were a subject of the Queen resident in such other State."

So also the Commonwealth can and does compel the services of citizens in the army irrespective of
their religious beliefs. But it could not legislate to apply compulsion only to persons who professed
a particular religion (sec. 116). Thus there is a very real difference between general legislation and
legislation limited to a particular class.

Apart from the defence power it would hardly be argued that the Commonwealth could, as it were,
forcibly seize a State department, its personnel, accommodation and equipment, under a law
specifically directed to this object. The reason for the invalidity of such a law would be that it was a
law with respect to a State department--a matter not within Commonwealth legislative powers. The
Commonwealth can, whenever it chooses, establish its own income tax department. The
Commonwealth can hire employees even if they belong to a State service, it can take property even
if it belongs to a State: but to do these things under general legislation is a very different thing from
completely and specifically liquidating a State department and preventing it from being re-
established. There is no Commonwealth power to legislate upon such a matter--unless the defence
power (sec. 51 (vi.)) can be called in aid.

The defence power was widely interpreted and applied in Farey v. Burvett[88]. But that case shows
that even this power has a limit--it is not sufficient to wave the flag as if that were a conclusive
argument. The defence power itself is subject to the Constitution (sec. 51, introductory words). Both
the extent of the power and the limitation to which it is subject appear from what was said in Farey
v. Burvett[89]. Griffith C.J. said: "One test, however, must always be applied, namely: Can the
measure in question conduce to the efficiency of the forces of the Empire, or 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?"[90]. Barton J. said that if the particular provision
was capable of assisting in defence, that was enough[91]. Isaacs J. said: "If the measure questioned
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 the Parliament and the Executive it controls--for they alone have the information, the
knowledge, and the experience and also, by the Constitution, the authority to judge of the situation
and lead the nation to the desired end"[92]. So, also, per Higgins J.: "It is not for this Court to
decide that the Act does aid defence, or how it aids defence; it is enough that it is capable of being
an Act to aid defence, enough that the statement of Parliament is not necessarily untrue"[93]. Unless
there is to be no definition whatever of defence, so that the defence power is absolutely unlimited,
there could be no wider definition or description than in the passages quoted. But the
Commonwealth can support legislation under the power only if it can satisfy a court that there is
some connection between the legislation in question and the defence of the country.

What connection is here suggested? The preamble to the Act states that with a view to the public
safety and defence of the Commonwealth and of the States and for the more effectual prosecution of
the war it is necessary and convenient to make the provisions contained in the Act. The Court
should treat this expression of the view of Parliament with respect. In a doubtful case it might turn
the scale, the presumption being in favour of the validity of Acts rather than of invalidity. But such
a declaration cannot be regarded as conclusive. A Parliament of limited powers cannot arrogate a
power to itself by attaching a label to a statute. Similar considerations apply to the provisions
contained in secs. 4 and 11 that the Treasurer may use powers under the Act if in his opinion it is
necessary for the defence of the Commonwealth &c. to do so.

It is contended for the Commonwealth that a single system of Commonwealth income tax in
substitution for the twenty-three income taxes now operating (six of which, it may be observed, are
Commonwealth taxes) will improve general efficiency by simplifying income-tax administration
and by making less onerous the duties of citizens in making returns, and so releasing manpower at a
time when manpower is urgently needed for the war. But the War-time Arrangements Act has no
relation to these objectives. The attainment of them depends upon the effect of the Tax Act and the
Grants Act in establishing a single system of income taxation. If, as is expected, the uniform system
reduces the work to be done by civil servants, accountants and clerks in relation to income tax, the
Commonwealth will have at its disposal under other legislation the services of any persons whom it
chooses to call up. The saving of the unnecessary and useless work will be exactly the same whether
or not the Commonwealth takes over the State departments, the Commonwealth itself determining
in either case what work is unnecessary or useless.

The only other argument used to show a connection between this Act and defence was the
suggestion that the Commonwealth could organize and administer an income tax department more
efficiently than the States, and that superior Commonwealth management would prevent waste of
manpower. This proposition cannot be assumed--and it has not been proved. Further, such an
argument would justify the Commonwealth in taking over any State department whatever under the
defence power upon the plea that Commonwealth management was always more efficient than State
management. The Court cannot base any decision upon an assumption so obviously disputable.

My conclusion, therefore, is that Act No. 21, the Income Tax (War-time Arrangements) Act 1942 is
invalid, because it is beyond the powers of the Commonwealth Parliament.

Income Tax Assessment Act 1942, sec. 31.--The provision in this Act which is attacked by the
plaintiffs is sec. 31, which inserts a new sec. 221 in the principal Act. Sub-sec. 1, par. a, is as
follows:--"For the better securing to the Commonwealth of the revenue required for the efficient
prosecution of the present war--(a) a taxpayer shall not pay any tax imposed by or under any State
Act on the income of any year of income in respect of which tax is imposed by or under any Act
with which this Act is incorporated until he has paid that last-mentioned tax or has received from
the Commissioner a certificate notifying him that the tax is no longer payable." Par. b gives effect to
Commonwealth priority in payment of income tax in bankruptcy and in the liquidation of a
company, and provides a penalty for infringement of the section of one hundred pounds or six
months' imprisonment or both, together with payment of up to double the amount of tax due. Sub-
sec. 2 prescribes the duration of the Act as in the case of the Grants Act, sec. 16.

Two objections are raised by the plaintiffs to this provision. First, it is contended that the
Commonwealth Parliament has no power to give priority to the obligation to pay Commonwealth
income tax over a lawful obligation to pay State income tax. Secondly, it is contended that, upon its
true construction, this section does more than give priority. It is argued that it prevents any payment
whatever of any future State income tax as long as the section is in operation.

The first objection cannot be supported. It is true that Dixon J. in Federal Commissioner of Taxation
v. Official Liquidator of E. O. Farley Ltd.[94] and Evatt J. in West v. Commissioner of Taxation
(N.S.W.)[95] expressed opinions which may be called in aid of the view that the Commonwealth
cannot, by a law passed under the taxation power, give itself priority over the States. But the weight
of authority is to the contrary effect: The Commonwealth v. State of Queensland[96] (per Isaacs and
Rich JJ.[97]; per Higgins J.[98]; per Gavan Duffy and Starke JJ.[99]); R. v. The Commonwealth
Court of Conciliation and Arbitration[100] (per Isaacs J.[101]; and per Gavan Duffy, Rich and
Starke JJ.[102]); West v. Commissioner of Taxation (N.S.W.)[103] (per Latham C.J.[104]; per Rich
J.[105]; per Starke J.[106]); and per Evatt J. in Federal Commissioner of Taxation v. Official
Liquidator of E. O. Farley Ltd.[107]. Apart from these authorities the case of In re Silver Brothers
Ltd.[108] is really conclusive on the matter. The Parliament of the Dominion of Canada has power
to make laws in relation to--"The raising of money by any mode or system of taxation" (British
North America Act 1867, sec. 91 (3)). Apart from the power to make laws with respect to
bankruptcy (see the report[109]) the Privy Council held that a provision was valid which made the
liability for a Dominion war revenue tax a first charge upon the assets of the taxpayer, and also
enacted that such liability should rank for payment in priority to all other claims of whatsoever kind
with a certain exception. It was said: "The two taxations, Dominion and Provincial, can stand side
by side without interfering with each other, but as soon as you come to the concomitant privileges of
absolute priority they cannot stand side by side and must clash; consequently the Dominion must
prevail"[110]. This decision does not depend upon any special provisions of the Canadian
Constitution. It is simply an interpretation of a power to make laws in relation to the subject of
taxation. The decision is applicable to the Commonwealth Constitution. Thus the Commonwealth
has power, by a properly framed law, to make Commonwealth taxation effective by giving priority
to the liability to pay such taxation over the liability to pay State taxation. Accordingly the first
objection fails.

The second objection depends upon the precise effect of the words of sec. 31. The defendants
contend that they mean only that State income tax in respect of any year shall not be paid until
Commonwealth income tax in respect of that year has been paid. The plaintiffs contend that,
whatever may have been thought to be the effect of the section, it really provides that no State
income tax can be paid for any year until Commonwealth income tax for that year and for future
years has been paid. This result follows, it is said, from the fact that the Tax Act imposes tax on all
future years of income (Tax Act, secs. 4, 7 (2)).

Sec. 31 provides that a taxpayer shall not pay State tax until he has paid some other Commonwealth
tax. The State tax is described in the following words: "any tax imposed by or under any State Act
on the income of any year of income in respect of which tax is imposed by or under any Act with
which this Act is incorporated." The Tax Act is an Act with which the Assessment Act is
incorporated (Tax Act, sec. 3).

The Commonwealth tax which under penalty must be paid before the State tax, is "that last-
mentioned tax," i.e., "a tax imposed by or under any Act with which this Act" (the Assessment Act)
"is incorporated"--i.e., by the Tax Act.

The plaintiffs argue that as the Tax Act imposes tax for all future years, no State income tax can be
paid on the income of any year until all future Commonwealth income taxes have been paid. Such
an interpretation of the section should not be adopted unless no other interpretation is reasonably
open. It is possible to construe the words "that last-mentioned tax" as referring only to
Commonwealth tax upon the year of income previously mentioned. This construction produces a
reasonable result and preserves the validity of the section. It should therefore be adopted.

In my opinion the declarations sought that the Tax Act, the Grants Act and sec. 31 of the Assessment
Act are invalid should not be made but a declaration should be made that the War-time
Arrangements Act is invalid, and an injunction limited to that Act should be granted in each action
as asked. The opinion of the majority of the Court is that none of the declarations or injunctions
sought by the plaintiffs should be made or granted. The result therefore is that the actions should be
dismissed. There will be no order as to costs.

Rich J.

I have had the privilege and advantage of reading the reasons which have been prepared by the
Chief Justice. As I am in agreement with his Honour on all points but one, and substantially in
agreement with his reasons save those concerned with the excepted point, no advantage, but rather
disadvantage, would be produced by my publishing separately the reasons which have led me to
arrive at the conclusions upon which we are in agreement. I confine myself, therefore, to stating my
reasons for coming to the conclusion upon which I have the misfortune to disagree with the learned
Chief Justice.

I agree with the view that the declarations sought that what have been described as the Tax Act, the
Grants Act, and sec. 31 of the Assessment Act are invalid should not be made. I am of opinion,
however, that the application for a declaration that the War-time Arrangements Act is invalid should
also fail. The argument relating to this Act has centred chiefly upon the provisions of sec. 4. This
provides, in effect, that the Treasurer may, at any time and from time to time, by notice addressed to
the Treasurer of any State, cause any officers of the State service specified in the notice, who have
been engaged in duties which, in the opinion of the Treasurer, are connected with the assessment or
collection of taxes upon incomes, to be temporarily transferred to the Public Service of the
Commonwealth. The Treasurer's powers in this respect are limited as to time by sec. 16, which
provides that the Act shall continue in operation until the last day of the first financial year to
commence after the date on which His Majesty ceases to be engaged in the present war, and no
longer; and the temporary quality of the transfer is defined by sec. 5, which provides that, unless
sooner retransferred, every transferred officer shall be retransferred to the State service immediately
after the Act ceases to operate. The authority of the Parliament to entrust to the Treasurer the limited
power contained in sec. 4 cannot be disputed (Hodge v. The Queen[111]; In re The Initiative and
Referendum Act[112]; British Coal Corporation v. The King[113]; Lloyd v. Wallach[114]). The Act
is expressed to be a war measure, created for the defence of the Commonwealth and the States and
for the more effectual prosecution of the present war. The scope of the defence power was discussed
by this Court in Farey v. Burvett[115], where Isaacs J., as he then was, in a passage which I quoted
in Andrews v. Howell[116], said that in considering whether a measure is supportable as an exercise
of the defence power "if the measure questioned 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 the Parliament and the Executive it controls--for
they alone have the information, the knowledge, and the experience and also, by the Constitution,
the authority to judge of the situation and lead the nation to the desired end"[117]. Applying this
test, and the test laid down by the other members of the Bench in that case, I am unable to see
anything in sec. 4, whether it be read alone, or in relation to the rest of the provisions of the Act in
which it occurs, or in relation to the group of statutes with which that Act is associated, which
justifies the conclusion that it is a colourable and not a real exercise by Parliament of the defence
power. It is notoriously essential, for the effective prosecution of such a war as is now being waged,
a war in which the continued existence of the Commonwealth and its constituent States is at stake,
that the whole resources of the nation, whether of men or of things, should be marshalled and
concentrated upon war effort. If the Commonwealth is to wage war effectively, it must command
the sinews of war. The taxing of income is an important source from which the funds required for
war purposes may be drawn; and the other Acts which have been brought in question show that the
Commonwealth Parliament was determined to make unusually large drafts upon this source. In
these circumstances, I see nothing sinister in a provision which enables the Commonwealth to take
over from the State service and place under its own exclusive control for the period of the war, such
of the officers employed in that service as it may specify, if those officers have been engaged on
duties connected with the assessment or collection of taxes upon income, and are therefore,
presumably, specially qualified to assist the Commonwealth by performing this essential service.
Nor, if the section be read with an unjaundiced eye, do I see anything sinister, or anything
suggesting that the section is intended to be used colourably and for the purpose of destroying each
and every new State income tax office as and when it may be created, in the provision that the
power may be exercised at any time and from time to time (although only during the period of the
war). For aught I know, the view may be taken that State offices are overmanned, and therefore in
all or some cases it may be proposed to specify in the first instance some only of the officers now
employed in the State income tax offices, and to specify others afterwards if more are found
necessary. Indeed, a military calamity, involving the destruction of a transferred building with its
personnel, might make it necessary for the Commonwealth, in the interests of the war effort, to
acquire the expert services even of a newly created office and specified members of a new staff
which a State had brought into existence for its own civil purposes.

However this may be, I am of opinion that the powers conferred by sec. 4 are capable of being used
for necessary purposes incidental to the defence of the Commonwealth. If at any time an attempt
should be made to use them for what is suggested to be some other and unjustifiable purpose, the
validity of the suggestion can be determined in proceedings to frustrate the attempt. It is
unnecessary in order to dispose of the present matter to determine whether it would be competent
for the Commonwealth Parliament, in exercise of the defence power, to exclude the States from a
particular field of taxation altogether.

For these reasons I am of opinion that there is nothing in, or connected with, the provisions of sec. 4
which either calls for or warrants the conclusion by this Court that its enactment stands outside the
defence power, or is a colourable as contrasted with a genuine exercise of that power.

As has been pointed out by the Chief Justice, the question whether any of the other provisions of the
Act are obnoxious to placitum 51 (xxxi.) of the Constitution has not been argued and in these
circumstances it would not be proper to rule upon the matter.

For the reasons which I have stated I am of opinion that the motion fails upon all points and that the
declarations asked for should not be made or the injunction granted.

Starke J.

The States of Victoria, South Australia, Queensland, and Western Australia, and the Attorney-
General of each State, have brought actions against the Commonwealth of Australia and its
Treasurer claiming a declaration that the whole or some one or more or some part or parts of the
Income Tax Act 1942 (No. 23 of 1942), Income Tax Assessment Act 1942 (No. 22 of 1942), States
Grants (Income Tax Reimbursement) Act 1942 (No. 20 of 1942), and Income Tax (War-time
Arrangements) Act 1942 (No. 21 of 1942) are or is ultra vires the Parliament of the Commonwealth
and/or that the scheme of uniform taxation embodied in the said Acts is invalid, and also claiming
ancillary relief.
The plaintiffs moved for interlocutory injunctions, but were ordered to deliver statements of claim,
to which the defendants demurred and also pleaded. By consent it was ordered that the case be
argued before the Full Court upon the notices of motion for interlocutory injunctions, the pleadings
and various affidavits, subject to all proper objections, and on the matter coming on for hearing
before the Court the parties agreed that the motions for injunctions should be treated as the trial of
the actions and turned into motions for decrees. Actions in the form adopted in these cases have the
sanction of decisions of this Court (Attorney-General for N.S.W. v. Brewery Employees Union of
N.S.W.[118]; The Commonwealth v. Queensland[119]; Tasmania v. Victoria[120]), with which may
be compared the decision of the Supreme Court of the United States of America in Massachussetts
v. Mellon[121], and the rules collected by Brandeis J. in Ashwander v. Tennessee Valley
Authority[122].

The Acts were challenged on the ground that they constituted a legislative scheme of taxation, the
object and operation whereof was to constitute the Commonwealth the exclusive taxing authority in
Australia in respect of income tax, and to prevent the States from exercising their constitutional
powers in relation thereto. The Report of a Committee on Uniform Taxation, and also the speech of
the Treasurer of the Commonwealth introducing into Parliament the Bills which became the Acts
attacked in this case, were tendered in support of this allegation, and also in support of an allegation
that the scheme effected discriminatory taxation between the States contrary to the provisions of the
Constitution. But they were rejected. The intention, object, or purpose of a legislative body can only
be legitimately ascertained from what it has chosen to enact either in express words or by reasonable
and necessary intendment (Salomon v. Salomon & Co.[123]; Assam Railways and Trading Co. v.
Commissioners of Inland Revenue[124]; W. R. Moran Pty. Ltd. v. Deputy Commissioner of
Taxation[125]; R. v. West Riding of Yorkshire County Council[126]; Sydney Municipal Council v.
The Commonwealth[127]). But the Court is not precluded from looking at the state and operation of
the law when the legislation was passed (Macmillan & Co. v. Dent[128]), nor from considering
matters illustrating the operation of that legislation. Evidence for these purposes was used and may
be found in the affidavits filed by the parties and in tables comparing the taxation under the
Commonwealth legislation with taxation then in force in both the Commonwealth and the States.

The States Grants (Income Tax Reimbursement) Act and the Income Tax (War-time Arrangements)
Act, and the Income Tax and the Assessment Acts are numbered in sequence, which indicates the
order in which the Bills for this legislation were presented to Parliament and passed into law, but
nothing turns on this order. It is desirable, I think, to consider each Act separately before
considering it together with other Acts as part of a scheme.

1. The Tax and Assessment Acts (No. 23 of 1942 and No. 22 of 1942).--Subject to the provisions of
the Constitution, secs. 86-95, the Commonwealth and the States have concurrent taxing power. That
power, within the limits of their several jurisdictions, is unlimited in its range both as to the kind of
tax, the subject upon which it shall be imposed, and the amount of the tax, but so, in the case of the
Commonwealth, as not to discriminate between States or parts of States, and so that the
Commonwealth shall not by any law or regulation of revenue give preference to one State or any
part thereof over another State or any part thereof (Constitution, secs. 51 (ii.) and 99). The Tax and
Assessment Acts do not on their face contravene these provisions of the Constitution. The tax is
graduated, rising steeply on the higher rates of income. But the Constitution only prohibits
discrimination between the States or parts of States, or giving preference by any law or regulation of
revenue to one State or any part thereof over another State or part thereof, and does not require
equality of burden: See Moran's Case[129].
Next it was contended that the following provision of the Assessment Act is invalid:--"For the better
securing to the Commonwealth of the revenue required for the efficient prosecution of the present
war--(a) a taxpayer shall not pay any tax imposed by or under any State Act on the income of any
year of income in respect of which tax is imposed by or under any Act with which this Act is
incorporated until he has paid that last-mentioned tax or has received from the Commissioner a
certificate notifying him that the tax is no longer payable" (Act No. 22 of 1942, sec. 31). It was said
that the Commonwealth had no power to give itself priority in payment of its income taxes over the
taxes of the States. But that contention, despite some dicta to the contrary, is precluded by the
decision of this Court in The Commonwealth v. Queensland[130], and by the decision of the Judicial
Committee in In re Silver Brothers Ltd.[131]. The taxing power gives the Commonwealth authority
to make its taxation effective and to secure to it the full benefit thereof. In my opinion, there is no
distinction in principle between the Commonwealth giving itself priority in the administration of
assets in bankruptcy and in giving itself priority in payment of the personal obligations imposed by
an income tax. The dicta above referred to may be found in Federal Commissioner of Taxation v.
Official Liquidator of E. O. Farley Ltd.[132] and West v. Commissioner of Taxation (N.S.W.)[133],
but the contrary view appears to have been expressed by the same justice in Federal Commissioner
of Taxation v. Farley[134], and note Graves v. New York[135].

It was also contended that sec. 31 prohibits taxpayers from paying to the States any taxation
whatever. If that were the proper construction of sec. 31 the Commonwealth would, I think,
transcend its authority, but I cannot so construe the section. The tax imposed is for a financial year,
that is, for the twelve months beginning on 1st July, but it is in every year assessed upon the year of
income preceding the year of tax: See Tax Act, No. 23 of 1942, sec. 7; Assessment Act 1936-1942,
secs. 17 and 6; Acts Interpretation Act 1901-1937, sec. 22. But there is nothing in sec. 31 which
prohibits or precludes a taxpayer from paying State taxes so soon as his liability for Commonwealth
income tax in any financial year has been discharged. The section prescribes priority of payment,
and it operates to that extent and no further, both in law and in fact.

2. The States Grants (Income Tax Reimbursement) Act 1942 (No. 20 of 1942).--By sec. 96 of the
Constitution the Parliament may grant financial assistance to any State on such terms and conditions
as the Parliament thinks fit. This section does not prohibit discrimination or preference (Victoria v.
The Commonwealth[136]; Deputy Federal Commissioner of Taxation (N.S.W.) v. W. R. Moran Pty.
Ltd.[137]).

The States Grants Act in sec. 4 provides: "In every financial year during which this Act is in
operation in respect of which the Treasurer is satisfied that a State has not imposed a tax upon
incomes, there shall be payable by way of financial assistance to that State the amount set forth in
the Schedule." And there are other provisions for further assistance which may be found in the Act,
but which it is unnecessary to detail. This device could be made effective, as well in time of war as
in time of peace, to control State legislation, and the administration of State laws, and ultimately to
control and supervise all State functions. The danger to the States is obvious enough, but this Court
has nothing to do with political policies or remedies; its sole function is to determine whether the
States Grants Act, in its present form, is warranted by the Constitution.

The government of Australia is a dual system based upon a separation of organs and of powers. The
maintenance of the States and their powers is as much the object of the Constitution as the
maintenance of the Commonwealth and its powers. Therefore it is beyond the power of either to
abolish or destroy the other. The limited grant of powers to the Commonwealth cannot be exercised
for ends inconsistent with the separate existence and self-government of the States, nor for ends
inconsistent with its limited grants (R. v. Barger[138]; In re Insurance Act of Canada[139];
Attorney-General for Alberta v. Attorney-General for Canada[140]).

The States Grants Act, it is said, leaves the States perfectly free to exercise their constitutional
powers, though the exercise by the Commonwealth of its powers of taxation may render the exercise
by the States of their powers difficult or impracticable from an economic standpoint, which it is the
object of the States Grants Act to relieve: Cf. Massachusetts v. Mellon[141]; Steward Machine Co.
v. Davis[142].

It cannot be doubted that the Commonwealth cannot expressly prohibit the States from exercising
their powers of taxation, and that those powers cannot, subject to the provisions of the Constitution,
sec. 51 (xxxviii.), be appropriated by the Commonwealth nor abdicated by the States. The question
in this case comes back to this: What is the object and operation of the States Grants Act? It
purports in sec. 4 to grant financial assistance to the States, but is it linked up with an object that is
beyond the powers of the Commonwealth, namely, to control the exercise by the States of their
powers to impose taxes upon income? The title of the Act itself is States Grants (Income Tax
Reimbursement) Act. The amounts of the grants set forth in the schedule to the Act are, it is
admitted in the pleadings, substantially the average of the amounts raised by each State by means of
income tax in the financial years of each respective State ended 30th June 1940 and 30th June 1941.
Further, the tax imposed under the Federal Act on the lower grades of income is moderate as
compared with the tax imposed upon higher grades of income. Consequently it was open for the
States to exploit this field of taxation, but if they do so the Grants Act deprives them of the financial
assistance thereby provided.

In my opinion, the object of the Act is not merely to grant financial assistance to the States, but
there is linked up in it an object and an end that is inconsistent with the limited grant of power given
by sec. 96 to the Commonwealth, namely, making the Commonwealth the sole effective taxing
authority in respect of incomes and compensating the States for the resulting loss in income tax. The
argument that the States Grants Act leaves a free choice to the States, offers them an inducement but
deprives them of and interferes with no constitutional power, is specious but unreal. And it does not
meet the substance of the States' position that the condition of the Act relates to a matter in respect
of which the Commonwealth has no constitutional power whatever, and yet by force of the
condition and not as a consequence of the exercise of any power conferred upon the
Commonwealth, the grant of assistance to the States is withdrawn unless they comply with its terms.
The real object of the condition is that already stated, and it is in my judgment neither contemplated
by nor sanctioned by the Constitution, and in particular by sec. 96 thereof. As I have said, all State
legislation and functions might ultimately be so controlled and supervised. The possibility of the
abuse of a power is not, however, an argument against the existence of a power. But if the extent of
the power claimed by the Commonwealth leads to "results which it is impossible to believe ... the
statute contemplated ... there is ... good reason for believing that the construction which leads to
such results cannot be the true construction of the statute" (The Queen v. Clarence[143]). A
legitimate use of the powers contained in sec. 96 may be found in the Road Grants Case (Victoria v.
The Commonwealth[144]), where the Commonwealth and the State of Victoria entered into an
agreement, the object of which was to aid the State in the construction and reconstruction of certain
roads. Incidentally the making of roads would be an aid to trade and commerce, and possibly also to
defence: See Federal Aid Roads Act 1926 (No. 46 of 1926). No doubt means can be found to give
the States financial assistance without crippling them in the exercise of their powers of self-
government if the Commonwealth taxation creates economic difficulties for them. But I cannot
agree that the provisions of sec. 96 enable the Commonwealth to condition that assistance upon the
States abdicating their powers of taxation or, which in substance is the same thing, not imposing
taxes upon income. In my opinion, it follows that the States Grants (Income Tax Reimbursement)
Act 1942 is not within the power or authority of the Commonwealth Parliament.

3. Income Tax (War-time Arrangements) Act 1942 (No. 21 of 1942).--By this Act officers of the
State service who have been engaged on duties connected with the assessment or collection of
income tax may be temporarily transferred to the Public Service of the Commonwealth, and are by
force of a notice given pursuant to the Act transferred accordingly. Any officer may be retransferred
to the State, which is obliged to reinstate that officer in a position in the State service upon such
terms and conditions as are not less favourable than the terms, conditions, and rights to which he
would have been entitled if the Act had not been passed, and his service as a transferred officer were
service with the State. And where during the period of his transfer the transferred officer dies or
resigns he is deemed to have been retransferred to the State service immediately prior to his death or
the acceptance of his resignation, and all rights of pension, payment, and other benefits arising in
respect of the officer's service shall be ascertained as if the Act had not been passed and his service
as a transferred officer were service with the State. The liability of the transferred officer to
contribute to any State fund established for the purpose of providing superannuation or other
benefits is continued, but there are provisions for adjustments as between the Commonwealth and
the States. Further, notice may be given to the States that the Commonwealth requires the
possession and use of their office accommodation, furniture, and equipment specified in the notice,
particularly or in general terms, and the Commonwealth then by force of the Act is given possession
and exclusive use thereof accordingly. Provision is made for compensation to the State. And where
any returns or records relating either wholly or partly to the assessment or collection of any tax
imposed upon incomes by the Parliament of the Commonwealth are in the possession of a State
those returns and records are from the commencement of the Act transferred to the possession of the
Commonwealth provided that the States shall have access to, and may copy such returns and records
as relate to the assessment or collection of any tax imposed upon incomes by or under any law of
that State.

The taxation departments of the States, excepting Western Australia, had for some years, by
arrangement with the Commonwealth, assessed and collected income tax on behalf of the
Commonwealth. Many taxpayers made only one return in which there were two columns, one for
particulars for State income-tax purposes, and the other for Commonwealth income-tax purposes.
But taxpayers with income derived from more than one State sometimes made two or more returns,
one to the Commonwealth, the other or others to the States. In the case of Western Australia the
Commonwealth by arrangement with the State assessed and collected tax both for itself and the
State. But except in the case of Western Australia the returns and records belong, I take it, to the
States, and are exceedingly valuable, if not essential, for the purpose of collecting, assessing and
checking income taxes.

It was faintly contended that the Income Tax (War-time Arrangements) Act was authorized by the
taxation power conferred upon the Commonwealth under the Constitution, but the main argument in
support of the Act was based upon the defence power, as was inevitable from the terms of the Act.
The preamble recites that it is necessary or convenient to provide for the matter contained in the Act
with a view to the public safety and defence of the Commonwealth and States and the more
effectual prosecution of the war, and in secs. 4 and 11 the authorities there given are declared to be
necessary for the efficient collection of revenue required for the prosecution of the war, for the
effective use of manpower, or otherwise for the defence of the Commonwealth. But the defence
power is subject to the Constitution just as are the other powers conferred by sec. 51 of the
Constitution.

The content of the defence power never changes, though war will, no doubt, enlarge the area of its
operation (Andrews v. Howell[145]). But the defence power does not, any more than any other
power contained in sec. 51, enable the Commonwealth to abolish or destroy the States. Nor can the
Commonwealth exercise that power for ends inconsistent with the existence of the States or the
exercise of their powers or their functions as self-governing bodies. The Commonwealth can
marshal the manpower and resources of the Commonwealth for the purposes of war, and it is said
that the Income Tax (War-time Arrangements) Act does no more. According to the argument the Act
has a "close and substantial," a direct and not an indirect, a proximate and not a remote, relation to
defence, and consequently is within the power. But such a standard is only one of degree and in the
end becomes a rule of expedience: See Santa Cruz Fruit Packing Co. v. National Labor Relations
Board[146].

The Act, as already set forth, takes power to the Commonwealth at its discretion, to transfer to its
service, and appropriate to its own purpose, all the officers, accommodation, and records of the
States which constitute their departments of income tax. It preserves all the rights of such officers
against the States. It enables the Commonwealth at its discretion to retransfer such officers to the
States, and, in any case, when the Act ceases to operate the Act retransfers such officers to the
States, and compels the States to reinstate the officers on terms not less favourable than they would
have been entitled to had the Act not been passed. It also, on the resignation or death of any
transferred officers, automatically retransfers them to the States and prescribes that all rights of
pension and other benefits arising in respect of an officer's service shall be ascertained as if the Act
had not been passed and his service as a transferred officer were service with the State. These
powers are wholly inconsistent with the exercise by the States of their powers and of their functions
as self-governing bodies. An important department--indeed an essential department--of the
Executive Government of the States may be taken from them, and all its officers, accommodation,
and records bodily transferred to the Commonwealth. And obligations are imposed upon the States
by force of the Act in relation to the officers transferred. The Commonwealth assumes the right to
regulate the relation of the States and the transferred officers, and thus to override any provision the
States may consider necessary or expedient in the matter. And it may be noted that the income tax
departments of the States are not among those departments transferred to the Commonwealth by
force of the Constitution, and in respect of which it has exclusive power to legislate (Constitution,
secs. 69 and 52 (ii.)).

The Income Tax (War-time Arrangements) Act is beyond the power conferred upon the
Commonwealth to make laws for the peace, order and good government of the Commonwealth with
respect to defence, or any other power conferred by the Constitution. Perhaps I ought to refer to the
Engineers' Case (Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd.)[147] and to
Andrews v. Howell[148], which the Commonwealth relied upon during the argument. Prior to the
decision of this Court in the Engineers' Case[149] the doctrine had been propounded of the
immunity of the instrumentalities and agencies of government, both Federal and State, from
interference by the other, an immunity based upon a prohibition implied from the structure of the
Constitution. The Engineers' Case[150] overruled this doctrine, which was contrary to the decision
of the Judicial Committee in Webb v. Outtrim[151], which had not been applied consistently in this
Court, and which was attended with difficulty in the working of the Constitution. The substance of
the decision is stated in the Engineers' Case[152]: "The doctrine of implied prohibition finds no
place where the ordinary principles of construction are applied so as to discover in the actual terms
of the instrument their expressed or necessarily implied meaning." The Court did not say that in
interpreting the Constitution no implications of any sort should be made, and the passage quoted
makes that, I hope, sufficiently clear. Critics however arose; one of them, however, happily assures
us that the decision was inevitable and a wise one however it was reached: See West v.
Commissioner of Taxation (N.S.W.)[153]. And it is noteworthy that this doctrine of "implied
prohibition" seems also recently (1939) to have been abandoned by the Supreme Court of the United
States (Graves v. New York[154]). Some implications are necessary from the structure of the
Constitution itself, but it is inevitable also, I should think, that these implications can only be
defined by a gradual process of judicial decision. Andrews v. Howell[155] is irrelevant to the matter
under review, but it illustrates the wide range of the defence power.

4. Severability.--The invalidity of the States Grants (Income Tax Reimbursement) Act 1942 and the
Income Tax (War-time Arrangements) Act 1942 does not, however, also render invalid the Income
Tax Act 1942 nor the Income Tax Assessment Act 1942. These last-mentioned Acts are in themselves
consistent, workable and effective, they deal with a subject matter within the power of the
Commonwealth, and are not connected with nor dependent upon the validity of the other Acts as
conditions, considerations or compensations. Moreover, the provisions of the Acts Interpretation Act
1901-1937, sec. 15A, can also be called in aid (Roughley v. New South Wales[156]; Deputy Federal
Commissioner of Taxation (N.S.W.) v. W. R. Moran Pty. Ltd.[157]).

5. The Acts as part of a scheme.--The Judicial Committee in Moran's Case[158] observed that
"where there is admittedly a scheme of proposed legislation, it seems to be necessary when the pith
and substance or the scope and effect of any one of the Acts is under consideration, to treat them
together and to see how they interact. The separate parts of a machine have little meaning if
examined without reference to the function they will discharge in the machine." It was not disputed,
I think, that the object of the Acts was to introduce into Australia a uniform income tax having
priority over State taxes upon income, paying to the States, which retired from the field of income
taxation, compensation substantially equal to the average of the amounts raised by that State by
means of income tax in the financial years ended June 1940 and 1941. The States, however, insist
that the scheme operates to destroy their constitutional powers to raise revenue by way of income
tax; to discriminate in taxation between them; and to give preference by a law or regulation of
revenue to those States which vacate the income-tax field over the States that do not vacate that
field. But the scheme of legislation is, I think, unimportant unless the legislation is connected
together and the provisions of the legislative Acts are dependent the one upon the other, which is
not, as I think, the case here. Assume, however, that the States Grants Act be valid, does it, coupled
with the Taxation Acts, discriminate between or prefer one State over another contrary to the
provisions of the Constitution? The provisions of the Acts taken together operate, it is said, as a sort
of rebate of taxation (Attorney-General for British Columbia v. McDonald Murphy Lumber
Co.[159]) contrary to the provisions of the Constitution. Moran's Case[160] itself supplies an
answer to the argument: See the report[161]. The grants of assistance, if valid, are for the purpose of
compensating the States for the losses they would each sustain from the imposition of uniform
taxation and preventing unfairness or injustice to the States. The taxation is applicable in all States
and parts of States alike, but the losses sustained by the States by the operation of the Tax Acts are
not alike, and are adjusted by the Grants Act.

In my judgment, the States Grants (Income Tax Reimbursement) Act 1942 and the Income Tax (War-
time Arrangements) Act 1942 should be declared invalid, but otherwise the relief claimed in the
several actions should be denied.

McTiernan J.
The question to be decided is whether four Acts which have been passed by the Commonwealth
Parliament are within the powers vested in the Parliament by the Commonwealth of Australia
Constitution Act. The Acts are the Income Tax Act 1942, the Income Tax Assessment Act 1942, the
States Grants (Income Tax Reimbursement) Act 1942 and the Income Tax (War-time Arrangements)
Act 1942.

In my opinion these Acts are justified by the following provisions of the Constitution: The Income
Tax Act and the Income Tax Assessment Act by sec. 51 (ii.), (vi.) and (xxxix.), the States Grants Act
by sec. 96, sec. 51 (vi.) and (xxxix.), and the War-time Arrangements Act by sec. 51 (vi.) and
(xxxix.).

Sec. 51 of the Constitution provides that the Parliament shall, "subject to this Constitution," have
power to make laws for the peace, order and good government of the Commonwealth of Australia
with respect to, among other things, "(ii.) Taxation; but so as not to discriminate between States or
parts of States:" "(vi.) The naval and military defence of the Commonwealth and of the several
States ...:" and "(xxxix.) Matters incidental to the execution of any power vested by this Constitution
in the Parliament ... or in the Government of the Commonwealth."

Sec. 96 vests in the Parliament power to grant financial assistance to any State on such terms and
conditions as the Parliament thinks fit.

It is a settled principle of interpretation that the words "subject to this Constitution" mean subject to
the provisions of the Constitution. They do not make any power vested in the Parliament by this
section subject to any a-priori rules for reconciling State and national powers under a Federal
system of government. It is also a settled principle that the powers vested in Parliament by the
Constitution are, subject only to its provisions, plenary. Each is not less than a complete power to
make laws with respect to the subject of the power.

The taxation power includes the power to impose income tax for the purposes of the
Commonwealth. The Court assumes that an Act, which in substance imposes taxation, was passed
by the Parliament for the purpose of raising revenue for the Commonwealth. There is no legal
limitation to the amount of the rate of taxation which the Parliament may impose.

The nature and extent of the Commonwealth defence power is explained in Farey v. Burvett[162]. In
that case Griffith C.J. said it "includes all acts of such a kind as may be done in the United
Kingdom, either under the authority of Parliament or under the Royal Prerogative, for the purpose
of the defence of the realm, except so far as they are prohibited by other provisions of the
Constitution. ... It includes preparation for war in time of peace, and any such action in time of war
as may conduce to the successful prosecution of the war and defeat of the enemy. This is the
constant and invariable meaning of the term. It is obvious, however, that the question whether a
particular legislative act is within it may fall to be determined upon very different considerations in
time of war and time of peace. ... I agree generally with Mr. Mann's argument that the power to
legislate with respect to defence extends to any law which may tend to the conservation or
development of the resources of the Commonwealth so far as they can be directed to success in war,
or may tend to distress the enemy or diminish his resources, as, for instance, by the prohibition of
trading with him or with persons associated with him. But this definition is not exhaustive. The
control of finance or trade may be the most potent weapon of all. One test, however, must always be
applied, namely: Can the measure in question conduce to the efficiency of the forces of the Empire,
or is the connection of cause and effect between the measure and the desired efficiency so remote
that one cannot reasonably be regarded as affecting the other?" (Farey v. Burvett[163], per Griffith
C.J.).

The Chief Justice added: "The power to make laws with respect to defence is, of course, a
paramount power, and if it comes into conflict with any reserved State rights the latter must give
way"[164].

The nature and extent of the Commonwealth defence power were also explained by Isaacs J., as he
then was, in Farey v. Burvett[165]. His Honour said that when war imperilling our existence had
begun the limits of the defence power "then are bounded only by the requirements of self-
preservation. It is complete in itself, and there can be no implied reservation of any State power to
abridge the express grant of a power to the Commonwealth"[166]. His Honour added:--"As I read
the Constitution, the Commonwealth, when charged with the duty of defending Commonwealth and
States, is armed as a self-governing portion of the British Dominion with a legislative power to do
in relation to national defence all that Parliament, as the legislative organ of the nation, may deem
advisable to enact, in relation to the defence of Australia as a component part of the Empire, a
power which is commensurate with the peril it is designed to encounter, or as that peril may appear
to the Parliament itself; and, if need be, it is a power to command, control, organize and regulate,
for the purpose of guarding against that peril, the whole resources of the continent, living and inert,
and the activities of every inhabitant of the territory. The problem of national defence is not
confined to operations on the battlefield or the deck of a man-of-war; its factors enter into every
phase of life, and embrace the co-operation of every individual with all that he possesses--his
property, his energy, his life itself; and, in this supreme crisis, we can no more sever the
requirements and efforts of the civil population, whose liberties and possessions are at stake, from
the movements of our soldiers and sailors, who are defending them, than we can cut away the roots
of a living tree and bid it still live and bear fruit, deprived of the sustenance it needs"[167].

Higgins J. said in the same case: "What is the ambit of the power, not merely to make laws for the
control of the forces, but to make laws (not for, but), with respect to naval and military defence, and
to matters incidental to that power and the powers of the Government? All the subjects for
legislation in sec. 51 are on the same logical level: there is no hierarchy in the powers, with the
power as to defence on the top. But, from the nature of defence, the necessity for supreme national
effort to preserve national existence, the power to legislate as to defence, although it shows itself on
the same level as the other powers, has a deeper tap-root, far greater height of growth, wider
branches, and overshadows all the other powers. Defence--naval and military defence--is primarily
a matter of force, actual or potential; the whole force of the nation may be required; and for the
purpose of bringing the whole force of the nation to bear, the policy of the States may have to be
temporarily superseded, the law made under the Federal Constitution prevailing (sec. 109). The
temporary suspension of the policy of a State may possibly help to prevent the total and permanent
paralysis of the State's policy and functions, and of the State itself, under foreign invasion and
domination. In Great Britain there is no limit to the legislative powers, and therefore there is no line
of demarcation between Acts for defence and Acts for other purposes"[168].

This doctrine as to the nature and extent of the defence power was accepted and applied recently in
the case of Andrews v. Howell[169].

Sec. 96 does not bind the Parliament to give equal grants to the States. A law granting financial
assistance is not a law or a regulation of revenue under sec. 99. Sec. 96 leaves to the judgment of
Parliament the question of deciding to what State or States it will grant financial assistance, the
amount of the grant, and the terms and conditions of the grant.

The Income Tax Act 1942 imposes income tax and declares the rates of taxation: See Constitution,
secs. 53 and 55. The Income Tax Assessment Act 1942 provides for the assessment and levy of
income tax. It is incorporated with the Income Tax Act 1942 by sec. 3 of this Act. Each of these Acts
is (apart from sec. 31 of the Assessment Act as to which a special question is raised) in real
substance and effect a law with respect to Commonwealth income taxation. Neither law contains
any provision which infringes any restriction imposed by the Constitution. The Acts do not, in the
imposition of the tax or in the declaration of the rates of taxation or in any other way, discriminate
between the States or parts of States.

The power of taxation (customs and excise excepted) is not by the Constitution exclusively invested
in the Commonwealth Parliament nor withdrawn from any State. This power continues in the States.
But any State law is subject to sec. 109 of the Constitution, which provides that when a law of a
State is inconsistent with a law of the Commonwealth, the latter shall prevail and the former shall,
to the extent of the inconsistency, be invalid. There is no legal limitation on the amount of the rate
of taxation which a State Parliament may impose. These Commonwealth and State powers of
taxation have been described as concurrent powers. They are, more strictly, separate powers. A State
Act and a Commonwealth Act have not been regarded as inconsistent, merely because each imposes
tax on a taxpayer in respect of the same income. But a question of inconsistency which is resolved
by sec. 109 in favour of the Commonwealth arises when the Commonwealth Parliament, by a valid
law, commands the taxpayer to pay the Commonwealth tax before he pays the State tax. Sec. 31 of
the Income Tax Assessment Act prohibits a taxpayer from paying State tax before he pays
Commonwealth tax.

A question was raised whether, having regard to sec. 7 (2) of the Income Tax Act 1942, the effect of
sec. 31 is to introduce a prohibition against the payment of State income tax. The question turns on
the meaning of the words "that last-mentioned tax" in sec. 31. These words, in my opinion, refer to
Commonwealth tax for a year of income in contradistinction to the State tax imposed in respect of
that year. The meaning of the section is that the taxpayer is forbidden under the penalty of £100 or
imprisonment for six months from paying State tax imposed for any year until he has paid the
Commonwealth tax due by him for that year.

Sec. 31 is preceded by the recital showing that in enacting the section Parliament intended to exert
the Commonwealth defence power. The recital is: "For the better securing ... of the revenue required
for the efficient prosecution of the present war." The operation of the section is expressly limited to
a period ending twelve months after the cessation of the war. Sec. 32 of the same Act provides that
all the other amendments made by the Act shall continue in force in all subsequent years.

The Income Tax (War-time Arrangements) Act is also prefaced by a recital showing that Parliament
regarded this Act as a defence measure. The recital is: "Whereas with a view to the public safety and
defence of the Commonwealth and of the several States and for the more effectual prosecution of
the war in which His Majesty is engaged, it is necessary or convenient to provide for the matters
hereinafter set out."

The Court is not bound to declare a law, containing a recital such as either of those which have been
quoted, a good law with respect to defence or matters incidental to the execution of the defence
power. The position is examinable, but in a limited way. In Farey v. Burvett[170], Griffith C.J.
said:--"So far as the attack is made upon the Act as distinct from the Regulation the Court is invited
to assume the function of determining whether the facts were at the time when the Act was passed
such as to warrant the Parliament in exercising the defence power by passing it. Whether it was or
was not authorized to do so must, so far as the authority depends upon facts, depend upon the facts
as they appeared to it, of which we have not, and cannot have, any knowledge. In my opinion there
is no principle, and there is certainly no precedent, which would justify a Court in entering upon
such an inquiry, if upon any state of facts the exercise of the legislative power in the particular way
adopted could be warranted. If it appeared on the face of the Act that it could not be substantially an
exercise of the defence power different questions would arise. I am not prepared to say that it may
not have some, and some important, influence upon the successful conduct of the war." And in the
same case Isaacs J. said: "If the measure questioned may conceivably in such circumstances" (now
the circumstances are a war of aggression against the Commonwealth, invasion of parts of its
territories, and threatened invasion of the Commonwealth) "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 the Parliament and the Executive it controls--for they alone have the information,
the knowledge and the experience and also, by the Constitution, the authority to judge of the
situation and lead the nation to the desired end"[171].

Reverting to sec. 31 of the Income Tax Assessment Act. This section gives the Commonwealth the
prior right to a large part of the financial resources of the whole country. It is clearly a law which is
incidental to defence, having regard to the present emergency. Parliament has rested the section on
the defence power, and it is justified by that power. It is unnecessary then to decide whether the
section is within the powers vested in the Parliament by sec. 51 (ii.) and (xxxix.).

The Income Tax Assessment Act denies to the taxpayer substantial deductions allowed by previous
Commonwealth Acts, and the Income Tax Act increases the rates of taxation far above the previous
rates. The consequence which will be likely to flow from these Acts is that a taxpayer will hardly be
able to pay State income tax out of the residue of his income left after he has obeyed the command
of sec. 31 to pay Commonwealth tax computed under the Commonwealth Acts. If the States are
unable to administer their State taxation Acts, or to freely exercise their powers of taxation, this
disability arises from the economic consequences of the Commonwealth Acts. But these economic
consequences and the resulting practical disability of the States are irrelevant in deciding the
question whether the Commonwealth legislation is within the legislative powers of the
Commonwealth. These Acts are in substance and effect laws with respect to Commonwealth
taxation and defence and matters incidental to the execution of these powers.

The States Grants (Income Tax Reimbursement) Act 1942.--This Act and the Income Tax Act were
assented to on the same day. It is expressed to begin on 1st July 1942, and to continue until the last
day of the first financial year beginning after the end of the war. This Act and the Income Tax Acts
will operate simultaneously. The Act describes itself as: "An Act to make provision for the grant of
financial assistance to States, and for other purposes." It is contended that this Act, which purports
to be an execution by the Parliament of the power vested in it by sec. 96, and the Income Tax Acts,
are only a colourable exercise by the Parliament of its powers because, as it is alleged, they are
interdependent parts of a scheme or total law the substance and effect of which is to collect both
Commonwealth and State taxation, to transfer a quota of the revenue collected to the States, and
thereby prevent the States from exercising their powers of taxation. In my opinion it is impossible to
draw these conclusions from the provisions of these Acts. Sec. 4 of the States Grants (Income Tax
Reimbursement) Act provides that in every financial year during which this Act is in operation in
respect of which the Commonwealth Treasurer is satisfied that a State has not imposed a tax upon
incomes, there shall be payable by way of financial assistance to that State the amount set forth in
the schedule against the name of that State. The amount is the average amount raised by that State
by means of income tax in the financial years ended 30th June 1940 and 1941, and the amount of
tax which the Income Tax Act 1942 is estimated to raise is approximately equal to the total amounts
which would have been raised by the Commonwealth and the States from income tax payable under
the existing State Acts and the previous Commonwealth Acts. Sec. 6 provides for the payment of
additional financial assistance to any State if the Treasurer of the State is of the opinion that the
payments under sec. 4 are insufficient to meet the revenue requirements of the State. Sec. 7 provides
that payments in accordance with the Act shall be made out of the Consolidated Revenue Fund of
the Commonwealth, which is appropriated accordingly by the Act.

It is clear from sec. 4 that the Commonwealth Parliament recognizes that the concurrent or separate
State powers of taxation will continue. The Act is indeed based on that assumption. The assumption
is a correct one. It is to be presumed that the Parliament fully appreciated that it might be
inexpedient or impracticable for the States or any one or more of them to collect income tax for
their own or its purposes after the increased Commonwealth demands were satisfied. If a State does
not impose income tax, that would be only because the taxable capacity of its citizens would be
practically exhausted by the payment of the Commonwealth taxation, which, by force of sec. 31 of
the Income Tax Assessment Act 1942, takes priority on account of the supremacy accorded by the
Constitution to Commonwealth law. In these circumstances the amount set against the name of the
State and possibly a further amount is payable to the State out of the Commonwealth Consolidated
Revenue Fund. The Act leaves to the Commonwealth Treasurer to ascertain whether the State has
imposed income tax or not. It is a misunderstanding of the provisions of the Act to say that it
requires the States to cease imposing income tax under penalty of forfeiting the amounts set against
their names respectively: it is also a misunderstanding of the Act to say that the grant is offered
upon condition that the States agree not to impose income tax. The Commonwealth Parliament is
neither using a stick to beat the States nor offering a bunch of carrots. The Commonwealth
Parliament has, in the exercise of its clear constitutional rights, tremendously increased the burden
of Commonwealth taxation, and given priority to that burden. It has left the States free to decide
whether they should impose an additional burden of taxation in any financial year. The Act provides
that, if "the Treasurer is satisfied that a State has not imposed a tax upon incomes," the amount
specified in the schedule is payable to that State. The payment is in truth and in fact made to relieve
a disability arising from the incorporation of the State in the Commonwealth. The money is paid to
reimburse the State for the loss of revenue which it has not been expedient to collect because of the
circumstances flowing from the operation of valid Commonwealth law. The money is paid out of
Commonwealth revenue. The Act is therefore in substance a law granting financial assistance to any
State to which it becomes payable. It is a mistake to say that the Income Tax Acts and the States
Grants Act are interdependent parts of a law for the collection and disbursement of taxation. The
relation between the Acts is that the States Grants Act is consequential upon the Income Tax Acts.
This is a legitimate relationship, and, indeed, entirely harmonious with the spirit of federalism.

It was said by the Judicial Committee in Moran's Case[172] that although a Commonwealth Act
imposing taxation should contain no discriminatory provisions violating sec. 51 (ii.), yet, if it were
followed by a Commonwealth appropriation Act "authorizing exemptions, abatements or refunds to
taxpayers in a particular State" it would be impossible to separate the Acts in considering the effect
of sec. 51 (ii.), "or to turn a blind eye to the real substance and effect of Acts passed by the Federal
Parliament at or about the same time, if it appears clear from a consideration of all the
Commonwealth Acts that the essence of the taxation is discriminatory"[173]. The conditions
contemplated do not exist here. The States Grants Act is an appropriation Act, but it does not
authorize exemptions, abatements, or refunds of tax to taxpayers in any States. The real substance
and effect of this Act is to grant financial assistance to the States. The real substance and effect of
the Income Tax Act is to impose taxation.

Sec. 51 (ii.) empowers the Commonwealth Parliament to make laws with respect to taxation, "but so
as not to discriminate between the States or parts of States." The argument that the Parliament has
infringed this restriction is answered by the following statement from the judgment of the Judicial
Committee in Colonial Sugar Refining Company Limited v. Irving[174]: "The rule laid down by the
Act is a general one, applicable to all the States alike, and the fact that it operates unequally in the
several States arises not from anything done by the Parliament, but from the inequality of the duties
imposed by the States themselves."

According to the doctrine of Farey v. Burvett[175] the States Grants Act may possibly be justified as
an exercise of the defence power, because it secures to the States for the period of the war a flow of
financial assistance which aids the maintenance of services which are capable of aiding the
successful prosecution of the war.

The Income Tax (War-time Arrangements) Act 1942.--This Act describes itself as: "An Act to make
provision relating to the collection of taxes during the present war, and for other purposes." This Act
was assented to on the same day as the other Acts. It is expressed to come into operation from then,
7th June 1942, and to continue in operation until the last day of the first financial year to commence
after the end of the present war. The provisions of this Act have already been set out, and I shall not
repeat them except to refer briefly to the provisions which are in sec. 4 with respect to the
temporary transfer of officers.

If these provisions are valid, those relating to the transfer of office accommodation, furniture and
records can be supported by the same reasoning. There may be separate but less general questions
arising under other sections upon which it is unnecessary now to pass an opinion. In brief, this Act
transfers temporarily to the Public Service of the Commonwealth from employment under the
Crown in right of a State, officers who are engaged on duties which, in the opinion of the
Commonwealth Treasurer, are connected with the assessment or collection of taxes upon incomes.
The Act is not self-executing. In order to effect the transfer, it is necessary for the Treasurer to give
a notice to the State Treasurer. The transfer is effected by the notice. It notifies this Minister that as
from the date specified it is, in the opinion of the Commonwealth Treasurer, "necessary for the
efficient collection of revenue required for the prosecution of the war, for the effective use of
manpower or otherwise for the defence of the Commonwealth," that the officers specified in the
notice should be temporarily transferred to the Public Service of the Commonwealth. The officers
are transferred by force of the notice as from the date specified, and are retransferred by the Act to
the State Service immediately after the Act ceases to operate, unless sooner transferred. The Act
contains detailed provisions protecting the rights of transferred officers.

In Farey v. Burvett[176] the War Precautions Act, No. 10 of 1914, as amended by the Act No. 3 of
1916, was impeached. The attack went to so much of the Act as purported to authorize the
Governor-General to make Regulations and Orders. The Act No. 3 of 1916 purported to authorize
the Governor-General to make such Regulations as he thought desirable for the more effectual
prosecution of the war, or the more effectual defence of the Commonwealth, "prescribing and
regulating" a number of matters. The attack on the Act failed. Griffith C.J. said: "If the attack is
transferred, as it must be, to the Regulation, that is, if it is treated as a denial of the desirability of
making it at the time when it was made, the question, though not formally the same, is the same in
substance. The Act expressly designates the Governor-General as the person to determine that
question of fact. How can this Court say that it will assume the function of revising his opinion? In
this aspect of the case Lloyd v. Wallach1(1915) [1915] HCA 60; 20 C.L.R. 299., decided by the
Court last year, is exactly in point, and is conclusive"[178]. The question arising under the present
Act is whether the legislative powers of the Commonwealth extend to the enactment of the
provisions in sec. 4. The preamble has already been quoted. Parliament has declared on the face of
the Act that its provisions are "necessary and convenient" for the more effectual prosecution of the
war. Referring to such a declaration on the face of the Act challenged in Farey v. Burvett[179],
Higgins J. said:--"It is not for this Court to decide that the Act does aid defence or how it aids
defence; it is enough that it is capable of being an Act to aid defence, enough that the statement of
Parliament is not necessarily untrue. Appellants' counsel urge that it is for this Court to decide
whether the military necessities now existing are sufficient to justify the Act--or, as finally stated,
whether this Act is capable of being a defensive Act in the circumstances of the country. In my
opinion, this is not our function"[180]. I agree with these views. The transfer of these officers to the
Commonwealth Public Service which has the duty of collecting the revenue of the Commonwealth
is capable of conducing to defence. The dependence of defence on revenue is an obvious truth. The
transfer of these officers will provide the Commonwealth with a skilled staff, and enable it to collect
its revenue promptly and efficiently: it will place the collection of the revenue in the hands of
officers who will be temporarily under its own control. At present in five States Commonwealth
income tax is being collected by State officers. This Act will enable the Commonwealth to dispose
the officers collecting its revenue at whatever places in the Commonwealth it thinks fit. It could not
do this if the officers were not transferred to the Commonwealth Service. These are some of the
considerations which point to the possibility at least of a relation between the provisions of sec. 4
and defence. In my opinion these provisions are within the powers vested in the Parliament to make
laws with respect to defence and matters incidental to the execution of this power. It follows that
sec. 4 and the provisions relating to the transfer of office accommodation, furniture, equipment and
records operate with the full force of their words as valid Commonwealth laws. There is no special
provision in the Constitution exempting the States or State officers from the operation of
Commonwealth legislation under sec. 51 (vi.), that is, the defence power. The reasoning of the
Court in the Engineers' Case[181] applies to sec. 51 (vi.). There the Court was dealing with the
question whether Commonwealth legislation under sec. 51 (xxxv.)--"industrial disputes"--bound
the Crown in right of a State when party to an industrial dispute. The Court said:--"Sec. 51 (xxxv.)
is in terms so general that it extends to all industrial disputes in fact extending beyond the limits of
any one State, no exception being expressed as to industrial disputes in which States are concerned;
but subject to any special provision to the contrary elsewhere in the Constitution. The respondents
suggest only sec. 107 as containing by implication a provision to the contrary. The answer is that
sec. 107 contains nothing which in any way either cuts down the meaning of the expression
industrial disputes in sec. 51 (xxxv.) or exempts the Crown in right of a State, when party to an
industrial dispute in fact, from the operation of Commonwealth legislation under sec. 51 (xxxv.).
Sec. 107 continues the previously existing powers of every State Parliament to legislate with respect
to (a) State exclusive powers and (b) State powers which are concurrent with Commonwealth
powers. But it is a fundamental and fatal error to read sec. 107 as reserving any power from the
Commonwealth that falls fairly within the explicit terms of an express grant in sec. 51, as that grant
is reasonably construed, unless that reservation is as explicitly stated"[182]. Sec. 107 does not cut
down the natural meaning or general operation of sec. 51 (vi.). The assumption that has to be
adopted is that in the present emergency the transfer of officers experienced in the assessment or
collection of tax from the State to the Commonwealth service for the duration of the war is capable
of conducing to defence. It follows that the Income Tax (War-time Arrangements) Act is a law with
respect to defence, and binding on those officers and on the States. The Act is in substance and
effect a law of defence, and with respect to matters incidental to the execution of that power. There
is nothing in its provisions to support the contention that it is part of a legislative scheme which is in
excess of the powers of the Commonwealth Parliament. The Act does not take away from the States
their constitutional powers of taxation nor purport to do so. It is nothing to the point to mention the
difficulties and trouble which the States may have in engaging other persons to take the place of the
officers who are transferred to the Commonwealth service or to replace the material things taken
over by the Commonwealth.

I agree that the Treasurer's speech is inadmissible in this action. It would be contrary to well-settled
principle for the Court to embark on an inquiry into the motives or purposes which the Parliament
had for passing these Acts, or the Minister had for introducing the Bills proposing them. The only
question to be decided is a question of power. Did the Parliament have power under the Constitution
to pass the Acts? In my opinion that question should be answered in favour of the defendants, and
there should be judgment for them in each case.

Williams J.

In these actions four States, South Australia, Victoria, Queensland and Western Australia, and their
respective Attorney-Generals, have each sued the Commonwealth of Australia and its Treasurer
claiming a declaration that the whole or some one or more of the following Acts, the States Grants
(Income Tax Reimbursement) Act, No. 20 of 1942, the Income Tax (War-time Arrangements) Act,
No. 21 of 1942, the Income Tax Assessment Act, No. 22 of 1942, and the Income Tax Act, No. 23 of
1942, or some part or parts thereof, are or is ultra vires the Parliament of the Commonwealth and
are or is unconstitutional and invalid and the scheme of uniform taxation embodied in these Acts is
unconstitutional and invalid.

The surrounding circumstances under which the four Acts were passed can be shortly stated as
follows:--

Since 1915 the Commonwealth and the States have each been levying income taxes, with the result
that, during the financial year commencing on 1st July 1941, there were in the Commonwealth and
the several States some twenty-three taxes on income, many of them differing not only in the rate
but also in the basis of assessment. Since the outbreak of war, the Commonwealth Parliament has
been increasing the rates of Federal income tax, particularly on the higher incomes, to an
unprecedented extent. Most taxpayers who have to pay Commonwealth income tax have also to pay
income tax in at least one of the States. As the incidence of taxation varies considerably in the
States, the Commonwealth Government has not been able to use for its own purposes what it
considers to be the full taxable capacity of many taxpayers in a less highly taxed State without
imposing an unsupportable burden on a taxpayer at the same income-tax level in a more highly
taxed State, by reason of the aggregate of Commonwealth and State taxes. In some cases the
combined rates of these taxes for the above financial year exceeded twenty shillings in the pound.
The taxable capacity of the community has been rising, largely from the defence expenditure of the
Commonwealth. The States, in addition to increased receipts from their railways, have been relieved
from expenditure on unemployment, which has greatly decreased, and the Commonwealth has
assumed responsibility for child endowment and widows' pensions.

The Commonwealth Government considers that, as the financial responsibilities of the States have
diminished, whilst its own expenditure has increased enormously, the only amount of revenue
previously derived from income tax which can be made available to the States during the further
continuance of the war, without prejudice to its own growing requirements, will be an amount in the
case of each State approximately equal to the average of the amounts raised by that State by means
of income tax in the financial years commencing 1st July 1939 and 1st July 1940. The amounts
payable to each State on this basis are those which appear in the schedule to the Grants Act. The
Commonwealth Government also considers there is a serious waste of manpower involved in the
administration of twenty-three different taxes by the taxation departments, and in taxpayers having
to comply with several Acts, many of which require the payment of the tax in instalments by
deductions from wages and dividends. In these circumstances the four Acts were passed, all being
assented to on 7th June 1942.

The Grants Act came into operation on 1st July 1942, while the other three Acts came into operation
on the day they received the Royal Assent. The Grants Act and the War-time Arrangements Act each
contain a concluding section that they shall continue in operation until the last day of the first
financial year to commence after the date on which His Majesty ceases to be engaged in the present
war, and no longer. The preamble to the War-time Arrangements Act states that it is necessary or
convenient to provide for the matters set out in the Act with a view to the public safety and defence
of the Commonwealth and the several States and for the more effectual prosecution of the war in
which His Majesty is engaged.

By sec. 4 of the Grants Act it is provided that, in every financial year during which the Act is in
operation in respect of which the Commonwealth Treasurer is satisfied that a State has not imposed
a tax upon incomes, there shall be payable by way of financial assistance to that State the amount set
forth in the schedule to the Act against the name of that State, less an amount equal to any arrears of
tax collected by or on behalf of that State during that financial year.

Sec. 31 of the Assessment Act provides (so far as material) that, for the better securing to the
Commonwealth of the revenue required for the efficient prosecution of the present war, a taxpayer
shall not pay any tax imposed by or under any State Act on the income of any year of income in
respect of which tax is imposed by or under any Act with which this Act is incorporated until he has
paid that last-mentioned tax or has received from the Commissioner a certificate notifying him that
the tax is no longer payable. Sec. 32 provides that the amendments effected by the Act, other than
that effected by sec. 31, shall apply to all assessments for the financial year beginning on 1st July
1942 and all subsequent years.

The Tax Act, sec. 7, provides that the tax imposed by the Act shall be levied and paid for the
financial year beginning on 1st July 1942, and that, until the commencement of the Act for the
levying and payment of income tax for the financial year beginning on 1st July 1943, the Act shall
also apply for all financial years subsequent to that beginning on 1st July 1942.

Several decisions of the Privy Council, including Attorney-General for Ontario v. Reciprocal
Insurers[183], In re Insurance Act of Canada[184], Attorney-General for Alberta v. Attorney-
General for Canada[185], W. R. Moran Pty. Ltd. v. Deputy Commissioner of Taxation
(N.S.W.)[186], and the decision of this Court in R. v. Barger[187], establish that, when the question
for determination is whether an Act of Parliament infringes some overriding constitutional
provision, the Court must examine the substance and purpose of the Act in order to discover what it
is the legislature is really doing. Where there are several Acts having, as in the present case, a clear
interaction, the Court is entitled to investigate the substance and purpose of each Act in the light of
the knowledge disclosed by them all.
The Tax Act is an Act which levies an income tax estimated to produce £145,000,000. The rates rise
steeply, reaching 18s. in the pound at £2,100 on income from property, and 16s. 6d. in the pound at
£2,500 and 18s. in the pound at £4,000 on income from personal exertion. As the Act imposes the
same rates of tax on all incomes which it taxes, it does not discriminate between States or parts of
States considered as geographical entities, and therefore complies with sec. 51 (ii.) of the
Constitution (Cameron v. Deputy Federal Commissioner of Taxation (Tas.)[188]). It deals with one
subject of taxation only, and so conforms to sec. 55 of the Constitution. The States admit that if the
Commonwealth Parliament had passed the Tax Act alone, this would have had the practical
economic effect of driving the States out of this field of taxation at least in the case of the higher
incomes, if they do not desire to bankrupt many of their citizens, leaving them at most with a
limited field amongst the lower incomes capable of actual exploitation. They contend, however, that
but for the Grants Act, by which the Commonwealth proposes to reimburse the States for the loss of
income tax to the extent of £33,489,000, the Parliament could have imposed lower rates sufficient to
raise a total amount reduced by this sum, in which event a taxable margin would have been left out
of which the States could raise a sufficient sum by way of income tax for their own purposes
without exceeding the financial capacity of their citizens. But to draw such a conclusion would be
pure surmise. If the Grants Act is valid, such assistance would be a Federal purpose under sec. 96 of
the Constitution. None of the Acts provide for any rebates, if the States refuse the grants. The whole
£145,000,000 is called up finally in any event. It is all payable, like other revenue of the
Commonwealth, into the Consolidated Revenue Fund. No part of it is earmarked to pay the grants.
At a time when the Commonwealth is floating frequent loans to enable it to meet its commitments,
it is idle to suggest that the whole of the tax is not required for Federal purposes. The Tax Act is, in
my opinion, an unexceptionable, if to many people a somewhat painful, exercise of the power to tax.

It was strongly urged that the condition in sec. 4 of the Grants Act is unlawful because it requires a
State to surrender its sovereign rights to levy income tax in order to qualify for a grant. Sec. 96 of
the Constitution authorizes the Commonwealth Parliament to grant financial assistance to any State
on such terms and conditions as the Parliament thinks fit. The grants to each State are not made
conditional upon acceptance by all the States. A separate offer is made to each State. The offer is
made upon an annual basis, so that if a State which accepts a grant the first year finds it an
insufficient reimbursement it will be able to refuse the grant in subsequent years. There is no illegal
interference with the sovereignty of the States, because the matter of levying or not levying their
own income tax is left entirely to the discretion of their own Parliaments. An analogous case would
be where the Commonwealth Parliament offered a State assistance on condition it ceased to carry on
the mining of a profitable ore, which the Commonwealth thought it was inadvisable to exhaust in
the national interest, the Commonwealth offering the State assistance under sec. 96 to offset the loss
of revenue it would suffer by doing so. The present case may be summed up as follows. The
Parliament, when the Commonwealth is in imminent danger, considers that it is not in the national
interest for the States to levy income tax. But it recognizes that, if they co-operate by agreeing not to
do so, they will require financial assistance to reimburse them for their loss of revenue. So it makes
its offer of assistance dependent on their co-operation. The condition is one which is capable of
aiding in the defence of the realm. Sec. 5 offers an inducement to the States to collect their arrears
of tax in respect of the financial years up to and including that of 1st July 1941. It is a fair and
equitable provision, as it gives to all States ultimately the benefit of all the taxes they levied prior to
the Tax Act coming into force. Faint objection was taken to sec. 6 of the Act on the ground that
Parliament and not the Treasurer must fix the amount of a grant; but, as Latham C.J. pointed out in
Deputy Federal Commissioner of Taxation (N.S.W.) v. W. R. Moran Pty. Ltd.[189], where several
authorities are cited: "It is too late now to argue that terms and conditions determined by a Minister
under such legislation are not determined by the Parliament." The allotments to the State are not
made on any ratable basis, but sec. 96 does not prohibit discrimination, and grants may be made to
one State and not to others and between the States on an unequal basis. Under the circumstances the
Grants Act is, in my opinion, a valid exercise by the Parliament of its powers under sec. 96.

Although the language of sec. 31 of the Assessment Act is not as clear as it might be, I agree with
Mr. Ham that it means Commonwealth income tax on the income of any year of income must be
paid in priority to the State tax for that year of income, so that, once the Commonwealth tax for any
financial year has been paid, the section does not prevent a taxpayer from then paying his State tax
for that financial year. Counsel for the States contended that, as both the Commonwealth and State
Parliaments are entitled by the exercise of their sovereign rights to impose income tax, there can be
no inconsistency between the two impositions, each of which operates concurrently but
independently of the other, so that it is not an exercise of the taxing power or incidental thereto for
the Commonwealth to provide that its tax shall be paid in priority to that of a State. But the Privy
Council in In re Silver Bros. Ltd.[190], and the majority of the Justices of this Court in Federal
Commissioner of Taxation v. Official Liquidator of E. O. Farley Ltd.[191], appear to me to have
considered, I would respectfully say correctly, that it is possible for the Canadian and Australian
national Parliaments respectively, by aptly framed legislation, to give priority to their taxation
statutes over those of the Provinces in the case of Canada and of the States in the case of Australia,
where they come into conflict in the same field in the sense that a taxpayer who has to pay the two
exactions is unlikely to be able to meet them both in full. In In re Silver Bros. Ltd.[192] Viscount
Dunedin said: "The two taxations, Dominion and Provincial, can stand side by side without
interfering with each other, but as soon as you come to the concomitant privileges of absolute
priority they cannot stand side by side and must clash; consequently the Dominion must prevail."
After pointing out, quite rightly, that each of these decisions relates to the liquidation of a company,
counsel for the States contended in the alternative that, even if the Commonwealth can make its tax
a prior charge upon a taxpayer's assets, it would still not be incidental to the taxation power to
prevent a taxpayer from paying his debts, including a State assessment, as they become due. It
would be impossible to make an income tax a fixed charge on a taxpayer's assets generally, some of
which he is acquiring and disposing of from day to day, while many taxpayers would not possess
particular assets of an appropriate nature to be charged specifically. Grave difficulties would be
encountered in evolving and heavy expense incurred in administering a system of fixed charges. The
only practical way, therefore, to prefer the Commonwealth debt would be to provide that it should
be paid in priority to the State debt. To do this would not be to manufacture inconsistency between
Federal and State laws. It would be a means of aiding the effective operation of the power
comparable to the right of the Commonwealth under the borrowing power, sec. 51 (iv.), to make its
loans attractive to investors by freeing them from State taxation (The Commonwealth v.
Queensland[193]). It would be strange if the Commonwealth could protect interest on its loans from
State taxes, but could not take effective measures against the States to ensure the getting in of
revenue required to pay the interest. The section is, in my opinion, a valid exercise of power.

Under arrangements made with the States pursuant to the Income Tax Collection Act 1923 the
Commonwealth in Western Australia is at present collecting its own income tax and the income tax
of that State through its own income tax department, while, in the other States, the State income tax
departments are collecting their own income tax and that of the Commonwealth. The affidavits filed
on behalf of the States show that they each maintain a department for the collection of State income
taxes, in which a large staff is employed consisting of officers the senior members of whom have
spent many years in the department and thereby acquired a specialized knowledge of the
administration of the State's income tax Acts. Each department uses for the purposes of its work
large numbers of typewriters, adding machines and other mechanical equipment. They are housed in
extensive offices in their respective capital cities, and, in the present conditions, it would be
impossible or impracticable to replace their personnel or equipment or to find other suitable
premises for their accommodation.

The Arrangements Act provides for the suspension of the existing arrangements with the States for
the assessment and collection of income tax, and the assessment and collection of the tax imposed
by the Tax Act in all States by the Commonwealth from a date fixed by proclamation until the Act
ceases to operate; for the compulsory temporary transfer of officers employed by the States in
assessing and collecting income tax to the Public Service of the Commonwealth and their
subsequent retransfer to the States; for the compulsory temporary use by the Commonwealth of any
office accommodation, furniture and equipment owned by a State; and for the compulsory
permanent acquisition by the Commonwealth of any records in the possession of a State relating to
the assessment and collection of Commonwealth income tax. The Act applies to all State servants,
permanent or temporary. The transfer to the Commonwealth Public Service is effected by the
Treasurer of the Commonwealth addressing a notice in writing to the Treasurer of a State. The
transfer can be called for if, in the opinion of the Treasurer of the Commonwealth, it is necessary for
the efficient collection of revenue required for the prosecution of the war, for the effective use of
manpower, or otherwise for the defence of the Commonwealth. The rights conferred upon the
Treasurer of the Commonwealth with respect to the office accommodation, furniture and equipment
of the States are also very extensive. He can demand the temporary possession and exclusive use of
this property for the Commonwealth when it is required for the efficient collection of revenue, for
the effective use of manpower, or otherwise for the defence of the Commonwealth. The Act
provides that, in default of agreement between the parties, compensation for the possession and use
of such property and the obligations of the Commonwealth with respect to keeping it in good order
and repair and otherwise shall be determined by an arbitrator appointed by the Governor-General.
No compensation is provided for the acquisition of the returns and records, but the States are given
the right to have access to and inspect those which relate to the assessment or collection of any tax
imposed upon income by or under any law of the State. No argument was addressed to the Court
whether the entry into the possession and use of the office accommodation, furniture and equipment
or the transfer of the returns and records would be an acquisition by the Commonwealth of State
property within the meaning of sec. 51 (xxxi.); or whether, if it is, provision for an arbitration by an
arbitrator appointed by the Federal Executive Council and therefore in effect by one of the parties is
a compliance with the placitum; or whether a right given to a State, from whom the returns or
records are acquired, to have access to and to inspect them is a fair equivalent for their value; so I
shall not express any opinion on these points. It is obvious from the framework of the Act as a
whole that it is sought to justify its constitutional validity as an exercise of the defence power. In
what Mr. Ham described as the piping times of peace there could be no question, I should imagine,
that the collection of taxes would be incidental to the execution of the taxation and not the defence
power. The defence power does not become in time of war a paramount power (Andrews v.
Howell[194], per Starke J.), but, as Dixon J. pointed out in the same case[195], though its meaning
does not change, "its application depends upon facts, and as those facts change so may its actual
operation as a power enabling the legislature to make a particular law." In Farey v. Burvett[196]
Isaacs J. said: (It is) "a power which is commensurate with the peril it is designed to encounter, or
as that peril may appear to the Parliament itself; and, if need be, it is a power to command, control,
organize and regulate, for the purpose of guarding against that peril the whole resources of the
continent, living and inert, and the activities of every inhabitant of the territory. The problem of
national defence is not confined to operations on the battlefield or the deck of a man-of-war; its
factors enter into every phase of life, and embrace the co-operation of every individual with all that
he possesses--his property, his energy, his life itself." The necessary steps to meet the peril depend
so greatly upon the knowledge of the Parliament and the Executive it controls that the Court, in
determining whether a particular Act is within the ambit of the power, is only concerned to see that
its provisions are such as to be capable even incidentally of aiding the effectuation of the power.
After that the Court must stay its hand, for "no authority other than the central Government is in a
position to deal with the problem which is essentially one of statesmanship" (per Viscount Haldane
when delivering the judgment of the Privy Council in Fort Francis Pulp and Power Co. v. Manitoba
Free Press Co.[197]).

In Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd.[198], Knox C.J., Isaacs, Rich
and Starke JJ., in their joint judgment, said:--"It is undoubted that those who maintain the authority
of the Commonwealth Parliament to pass a certain law should be able to point to some enumerated
power containing the requisite authority. But we also hold that, where the affirmative terms of a
stated power would justify an enactment, it rests upon those who rely on some limitation or
restriction upon the power, to indicate it in the Constitution"[199].

It was there held that States and their agencies, when parties to industrial disputes in fact, are subject
to Commonwealth legislation under placitum xxxv. of sec. 51 of the Constitution, if such legislation
on its true construction applies to them. This is because, when States become merchants and traders
and engage in industrial activities which the general public may carry on, the subject matter of the
power conferred on the Parliament by this placitum is such as to embrace States acting in such a
capacity as well as individuals within its scope.

Applying the principles laid down in the Engineers' Case[200], there can be no doubt, in my
opinion, that States, like individuals, are within the ambit of the defence power, so that, where it is
incidental to the execution of the power to take some action to meet an emergency which affects
rights which in normal times are within the domain exclusively reserved to the States by the
Constitution, the Commonwealth Parliament can do so. In Farey v. Burvett[201] legislation under
the power was held to be valid, although relating to a subject matter, i.e., the price of bread, which
in times of peace would have been only within the powers of the States. Any attempt at State
legislation on this subject which came into collision with the Federal Act would have been to that
extent void under sec. 109 of the Constitution. But in times of peace the State legislation would
have been valid and the Commonwealth legislation invalid. In mobilizing the resources of the nation
under the defence power, the Parliament has the same right to call for the services of those
employed by the States as of those employed by private employers, and the same power to enter
into possession of property owned by the States as in the case of property privately owned. If the
real substance and purpose of a statute is incidental to defence, then, however seriously its operation
may hinder the carrying on of the government of a State, this would simply be the indirect result of
the lawful action of the Commonwealth undertaken to meet the national emergency. It is one thing
for the Commonwealth Parliament to attempt directly to prevent a State exercising its legislative,
judicial, or executive functions, which would be an illegal interference with the prerogative rights of
the State, and quite another thing to claim the services of a body of individuals employed by or the
possession of property owned by a State where the employees and property are organized, as they
are here, so as to possess some special attribute capable of advancing the total war effort. But
legislation which appears to discriminate against a State by the mass transfer of its public officers in
one department and the exclusive acquisition of its property must be carefully scrutinized to see that
its real substance and purpose is to assist defence and not under colour of such a purpose to
intermeddle in the sovereignty of a State. The affidavits filed on behalf of the States themselves
show that the collection of the new tax would be gravely impeded if the Commonwealth had to
organize a new department in every State except Western Australia. It was suggested that the
existing arrangements, which have worked satisfactorily since 1923, should be allowed to continue.
Their provisions are not before us, but it appears that they would have to be at least revised because,
if the Commonwealth is to become during the war the sole income-tax authority, the expense which
is now shared between the Commonwealth and the States will become the sole burden of the
Commonwealth. The only reason Mr. Ham gave for the Commonwealth requiring a transfer of the
officers and accommodation was that, as the tax was being collected on behalf of the
Commonwealth, it ought to have control of its own affairs. It is not for us to weigh the merits of this
reason. The question whether the Commonwealth should have direct control or should have to rely
upon an agent to perform this important work is one of policy which must be decided by the
Government and not by the Court. It is clear that an Act to enable the Treasurer to get in
expeditiously the sinews of war to the extent of £145,000,000 can assist in the prosecution of the
war, and is, therefore, incidental to the execution of the power of defence. If the Commonwealth
could call up all officers by some form of legislation, and this must, I think, be conceded, it is a
matter of convenience and not of substance that the Act provides for the Treasurer of the
Commonwealth giving the notice to the Treasurer of a State instead of to each officer personally.

Secs. 5-10 of the Act contain provisions with respect to the pay of transferred officers whilst in the
service of the Commonwealth and their rights on death, retirement, or at the conclusion of their
service with the Commonwealth. Whilst they are employed by the Commonwealth they are to
receive the same pay from the Commonwealth as, but for the transfer, they would have received
from the State. Upon retirement they are retransferred to the State and become entitled to the same
pension and other benefits they would have received if they had not been transferred. The sections
provide for the continuation of payments to superannuation funds by the officers themselves, and
the Commonwealth making the same payments as a State would have made if they had been serving
the State. The Commonwealth also contributes to pensions or other payments which dependents of
officers who die become entitled to receive from the State, the respective obligations of the
Commonwealth and the State being adjusted on the basis of the officers' length of service with the
Commonwealth and the State. A transferred officer is deemed to be an officer of the State for the
purpose of promotion or transfer from a temporary to a permanent position. The purpose of the
sections is to provide a scheme to prevent officers suffering from the temporary transfer, the
Commonwealth taking over a fair share of the burdens of any emoluments which would have
accrued from long service if their employment by the State had been continuous. In America it has
been held that, under the commerce power, Congress can legislate to prevent any person engaging in
unfair labour practices which affect commerce. The National Labor Relations Act 1935, after
defining unfair labour practices, by sec. 10 (c) authorized a Board to require the reinstatement of
employees who had been discharged for engaging in trade union activities which the Act authorized
them to engage in against the wishes of their employers. The Supreme Court held the provision to
be valid. It did not interfere with the contractual relationship of the parties except to the extent
necessary to give effect to the policy of the Act (National Labor Relations Board v. Jones &
Laughlin Steel Corporation[202]). So, under the defence power, the Commonwealth can, in my
opinion, legislate with respect to the reinstatement of citizens called up for some national duty, to
prevent them being prejudiced in their civil employment when their services are no longer required
for this purpose. The present Act purports to do nothing more. It does not deprive the States of any
rights the States would have against the officers on the basis that they had not been transferred. The
States can legislate as freely as before to affect any existing rights of public servants with respect to
pay, contributions to superannuation funds, amounts of pensions, and so on, and the officers
transferred to the Commonwealth will be bound by all such legislation. If the Commonwealth
Parliament can pass legislation making awards binding on the States under the conciliation and
arbitration power, it would be a strange result if, under the defence power, it cannot legislate with
respect to the reinstatement of men employed by a State and called up by the Commonwealth for
national service in the same way as it can legislate for this purpose with respect to private
employers. It is suggested that the powers conferred on the Treasurer are in terms wide enough to
enable him to call up any officers whom a State, in order to collect arrears of or to levy its own
income tax, might engage from time to time to replace those who had been transferred, and to take
possession of any new office accommodation they might commence to use for this purpose; but the
Treasurer can only call up officers, on the recommendation of the Public Service Board, if they are
required in the Public Service of the Commonwealth for one of the three purposes mentioned; and it
is preposterous to believe that the Public Service Board and the Treasurer would conspire together
to call them up when they were not required, and thereby deliberately overstaff the Commonwealth
Public Service at the expense of the taxpayers in order to deprive a State of their services. To do so
would be to make a colourable use of the power which could be restrained by the Court. The Grants
Act, sec. 4, contemplates that existing arrears of State income tax will be collected, if necessary, by
the Commonwealth, and it is to the advantage of both the Commonwealth and the States that they
should be got in.

The Arrangements Act is, in my opinion, a valid exercise of the defence power. As it is with
considerable diffidence that I have reached a different conclusion from that arrived at by the Chief
Justice and my brother Starke with respect to the validity of this Act, I desire to say that, even I
considered the Act invalid, this would not affect the validity of the Tax Act, the Grants Act, or sec.
31 of the Assessment Act.

The States also allege that the effect of the Acts regarded as a single legislative scheme is to spread
the burden of existing Commonwealth and State income taxes over the taxpayers of the
Commonwealth as such and thereby to effect a discrimination between the States and the taxpayers
of each State as such by reference to the varying rates of income tax at present in force therein. It is
sufficient to say with respect to this contention that, although admittedly taxpayers in the different
States previously paid income tax to a State and the Commonwealth at varying aggregate rates, this
was due to the difference in the taxation laws of the States and not to the law of the Commonwealth
(Colonial Sugar Refining Co. Ltd. v. Irving[203]). Taxpayers in the States who paid State income
tax at lower rates than those in the other States will now have to pay more to the Commonwealth in
comparison, but any attempt by the Commonwealth to make rebates to adjust this position would
bring about a result in conflict with the prohibition against discrimination contained in sec. 51 (ii.)
of the Constitution.

In my opinion, the actions should be dismissed.

Actions dismissed.

Solicitor for the plaintiffs, the State of South Australia and the Attorney-General thereof, A. J.
Hannan K.C., Crown Solicitor for South Australia, by F. G. Menzies, Crown Solicitor for Victoria.

Solicitor for the plaintiffs, the State of Victoria and the Attorney-General thereof, F. G. Menzies,
Crown Solicitor for Victoria.

Solicitor for the plaintiffs, the State of Queensland and the Attorney-General thereof, William G.
Hamilton, Crown Solicitor for Queensland, by F. G. Menzies, Crown Solicitor for Victoria.
Solicitor for the plaintiffs, the State of Western Australia and the Attorney-General thereof, E. A.
Dunphy, Crown Solicitor for Western Australia, by F. G. Menzies, Crown Solicitor for Victoria.
Solicitor for the defendants, H. F. E. Whitlam, Crown Solicitor for the Commonwealth.
[1] [1939] HCA 27; (1939) 61 C.L.R. 735, at p. 754.
[2] (1940) A.C. 838, at p. 849 [1940] UKPCHCA 3; ; 63 C.L.R. 338, at p. 341.
[3] [1846] EngR 451; (1846) 2 C.B. 749, at p. 757 [135 E.R. 1141, at p. 1144] [1848] EngR 498; ;
(1848) 2 Ex. 256, at p. 273 [154 E.R. 487, at p. 495].
[4] (1906) 2 K.B. 676, at p. 716.
[5] (1935) A.C. 445.
[6] [1922] USSC 35; (1922) 257 U.S. 563, at p. 589 [66 Law. Ed. 371, at p. 383].
[7] (1881) 8 Q.B.D. 119, at p. 123.
[8] (1899) 1 Q.B. 909, at p. 917.
[9] [1904] HCA 50; (1904) 1 C.L.R. 208, at p. 213.
[10] (1895) L.R. 22 Ind. App. 107, at p. 118.
[11] [1918] HCA 30; (1918) 25 C.L.R. 32, at p. 43.
[12] [1939] HCA 27; (1939) 61 C.L.R. 735, at pp. 793 et seq.
[13] [1810] USSC 10; (1809) 6 Cranch 87 [3 Law. Ed. 86].
[14] (1939) A.C. 117.
[15] (1940) A.C. 838, at p. 849 [1940] UKPCHCA 3; ; 63 C.L.R. 338, at p. 341.
[16] [1908] HCA 43; (1908) 6 C.L.R. 41.
[17] (1908) 6 C.L.R., at pp. 66, 67.
[18] (1908) 6 C.L.R., at pp. 89, 90.
[19] (1908) 6 C.L.R., at p. 118.
[20] [1938] HCA 9; (1938) 59 C.L.R. 170, at pp. 179, 180, 185.
[21] [1908] HCA 43; (1908) 6 C.L.R. 41.
[22] [1904] HCA 50; (1904) 1 C.L.R. 208, at p. 232.
[23] [1939] HCA 27; (1939) 61 C.L.R. 735, at pp. 763, 764.
[24] (1940) A.C. 838, at pp. 856, 857 [1940] UKPCHCA 3; ; 63 C.L.R. 338, at pp. 347, 348.
[25] [1939] HCA 27; (1939) 61 C.L.R. 735, at p. 763.
[26] (1896) A.C. 348, at p. 366.
[27] (1921) 2 A.C. 91, at p. 117.
[28] [1926] HCA 48; (1926) 38 C.L.R. 399.
[29] [1923] USSC 152; (1923) 262 U.S. 447, at p. 480 [67 Law. Ed. 1078, at p. 1082].
[30] [1936] USSC 11; (1936) 297 U.S. 1, at pp. 70, 71 [80 Law. Ed. 477, at pp. 490, 491].
[31] (1936) 297 U.S., at p. 81 [80 Law. Ed., at p. 496].
[32] [1936] USSC 93; (1936) 298 U.S. 238: see pp. 310 et seq. [80 Law. Ed. 1160: see pp. 1188 et
seq.].
[33] [1937] USSC 109; (1937) 301 U.S. 548 [81 Law. Ed. 1279].
[34] (1937) 301 U.S., at p. 589 [81 Law. Ed., at p. 1292].
[35] (1937) 301 U.S., at p. 610 [81 Law. Ed., at p. 1303].
[36] [1904] HCA 1; (1904) 1 C.L.R. 91.
[37] (1904) 1 C.L.R., at p. 111.
[38] [1906] HCA 94; (1906) 4 C.L.R. 488.
[39] [1920] HCA 54; (1920) 28 C.L.R. 129.
[40] (1920) 28 C.L.R., at p. 143.
[41] [1937] HCA 26; (1937) 56 C.L.R. 657.
[42] (1937) 56 C.L.R., at pp. 681, 682.
[43] (1937) 56 C.L.R., at pp. 698, 701, 702.
[44] [1920] HCA 54; (1920) 28 C.L.R. 129.
[45] [1904] HCA 1; (1904) 1 C.L.R. 91.
[46] [1920] HCA 54; (1920) 28 C.L.R. 129, at p. 143.
[47] [1908] HCA 43; (1908) 6 C.L.R. 41, at p. 84.
[48] (1905) 6 C.L.R., at p. 84.
[49] [1920] HCA 54; (1920) 28 C.L.R. 129.
[50] [1925] HCA 30; (1925) 36 C.L.R. 170, at p. 191.
[51] [1937] HCA 26; (1937) 56 C.L.R. 657, at pp. 681, 682.
[52] [1920] HCA 54; (1920) 28 C.L.R. 129.
[53] (1937) 56 C.L.R., at p. 687.
[54] [1920] HCA 54; (1920) 28 C.L.R. 129.
[55] [1920] HCA 54; (1920) 28 C.L.R. 129.
[56] (1937) 56 C.L.R., at pp. 701, 702.
[57] (1921) 2 A.C. 91.
[58] (1924) A.C. 999, at p. 1006.
[59] [1936] UKPCHCA 4; (1936) A.C. 578, at p. 611; 55 C.L.R. 1, at p. 41.
[60] [1923] HCA 23; (1923) 32 C.L.R. 200, at pp. 210, 218.
[61] (1937) 56 C.L.R., at pp. 687, 688.
[62] [1920] HCA 54; (1920) 28 C.L.R. 129.
[63] [1920] HCA 54; (1920) 28 C.L.R. 129, at p. 155.
[64] (1883) 9 App. Cas. 61, at p. 74.
[65] [1908] HCA 43; (1908) 6 C.L.R. 41, at pp. 66, 67.
[66] [1911] HCA 19; (1911) 12 C.L.R. 321, at p. 335.
[67] [1915] HCA 39; (1915) 20 C.L.R. 148, at pp. 173, 174.
[68] [1937] USSC 68; (1937) 300 U.S. 506 [81 Law Ed. 772].
[69] (1937) 81 Law. Ed., at pp. 776 et seq.
[70] (1915) A.C. 330, at pp. 337, 338.
[71] (1921) 2 A.C. 91, at pp. 99, 100.
[72] (1924) A.C. 328, at p. 342.
[73] (1924) A.C. 328.
[74] (1932) A.C. 41.
[75] (1932) A.C., at pp. 48, 51, 52.
[76] (1939) A.C. 117, at p. 129.
[77] [1920] HCA 54; (1920) 28 C.L.R. 129.
[78] [1908] HCA 43; (1908) 6 C.L.R. 41.
[79] [1908] HCA 43; (1908) 6 C.L.R. 41.
[80] [1939] HCA 27; (1939) 61 C.L.R. 735, at pp. 759, 760.
[81] (1939) 61 C.L.R., at pp. 762 et seq.; (1940) A.C. 838, at pp. 857, 858 [1940] UKPCHCA 3; ;
63 C.L.R. 338, at pp. 348, 349.
[82] (1939) 61 C.L.R., at pp. 762 et seq.; (1940) A.C. 838, at pp. 857, 858 [1940] UKPCHCA 3; ;
63 C.L.R. 338, at pp. 348, 349.
[83] (1940) A.C. 838, at p. 858 [1940] UKPCHCA 3; ; 63 C.L.R. 338, at p. 350.
[84] [1936] USSC 11; (1936) 297 U.S. 1 [80 Law. Ed. 477].
[85] (1936) 297 U.S., at p. 68 [80 Law. Ed., at p. 489].
[86] [1920] HCA 54; (1920) 28 C.L.R. 129.
[87] [1936] USSC 11; (1936) 297 U.S. 1 [80 Law. Ed. 477].
[88] [1916] HCA 36; (1916) 21 C.L.R. 433.
[89] [1916] HCA 36; (1916) 21 C.L.R. 433.
[90] (1916) 21 C.L.R., at p. 441.
[91] (1916) 21 C.L.R., at p. 449.
[92] (1916) 21 C.L.R., at pp. 455, 456.
[93] (1916) 21 C.L.R., at p. 460.
[94] [1940] HCA 13; (1940) 63 C.L.R. 278, at pp. 316, 317.
[95] [1937] HCA 26; (1937) 56 C.L.R. 657, at pp. 704-706.
[96] [1920] HCA 79; (1920) 29 C.L.R. 1.
[97] (1920) 29 C.L.R., at p. 21.
[98] (1920) 29 C.L.R., at pp. 26, 27.
[99] (1920) 29 C.L.R., at p. 28.
[100] [1926] HCA 51; (1936) 38 C.L.R. 563.
[101] (1936) 38 C.L.R., at p. 570.
[102] (1936) 38 C.L.R., at p. 580.
[103] [1937] HCA 26; (1937) 56 C.L.R. 657.
[104] (1937) 56 C.L.R., at p. 670.
[105] (1937) 56 C.L.R., at p. 675.
[106] (1937) 56 C.L.R., at p. 677.
[107] [1940] HCA 13; (1940) 63 C.L.R. 278, at pp. 324, 325.
[108] (1932) A.C. 514.
[109] (1932) A.C., at p. 521.
[110] (1932) A.C., at p. 521.
[111] (1883) 9 App. Cas. 117, at p. 132.
[112] (1919) A.C. 935, at p. 945.
[113] (1935) A.C. 500, at p. 519.
[114] [1915] HCA 60; (1915) 20 C.L.R. 299, at p. 310.
[115] [1916] HCA 36; (1916) 21 C.L.R. 433.
[116] [1941] HCA 20; (1941) 65 C.L.R. 255, at p. 263.
[117] (1916) 21 C.L.R., at pp. 455, 456.
[118] [1908] HCA 94; (1908) 6 C.L.R. 469.
[119] [1920] HCA 79; (1920) 29 C.L.R. 1.
[120] [1935] HCA 4; (1935) 52 C.L.R. 157.
[121] (1923) 262 U.S., at p. 447 [67 Law. Ed., at p. 1078].
[122] [1936] USSC 36; (1936) 297 U.S. 288, at pp. 346-348 [80 Law. Ed. 688, at pp. 710-712].
[123] (1897) A.C. 22, at p. 38.
[124] (1935) A.C. 445, at pp. 457, 458.
[125] (1940) A.C. 838, at p. 849 [1940] UKPCHCA 3; ; 63 C.L.R. 338, at p. 341.
[126] (1906) 2 K.B. 676.
[127] [1904] HCA 50; (1904) 1 C.L.R. 208, at p. 213.
[128] (1907) 1 Ch. 107, at p. 120.
[129] (1940) A.C., at p. 857; 63 C.L.R., at p. 349.
[130] [1920] HCA 79; (1920) 29 C.L.R. 1.
[131] (1932) A.C. 514.
[132] [1940] HCA 13; (1940) 63 C.L.R. 278, at pp. 312 et seq.
[133] [1937] HCA 26; (1937) 56 C.L.R. 657, at pp. 702-706, 709, 710.
[134] (1940) 63 C.L.R., at pp. 324-326.
[135] [1939] USSC 60; (1939) 306 U.S. 466, at pp. 478, 479, 492 [83 Law. Ed. 927, at pp. 931,
932, 940].
[136] [1926] HCA 48; (1928) 38 C.L.R. 399.
[137] (1939) 61 C.L.R., at pp. 763, 764, 771, 772; (1940) A.C., at p. 857; 63 C.L.R., at p. 349.
[138] [1908] HCA 43; (1908) 6 C.L.R. 41.
[139] (1932) A.C., at p. 52.
[140] (1939) A.C. 117.
[141] (1923) 262 U.S., at p. 483 [67 Law. Ed., at p. 1083].
[142] (1937) 301 U.S., at pp. 589, 590 [81 Law. Ed., at pp. 1292, 1293].
[143] (1888) 22 Q.B.D. 23, at p. 65.
[144] [1926] HCA 48; (1926) 38 C.L.R. 399.
[145] [1941] HCA 20; (1941) 65 C.L.R. 255, at pp. 272-278.
[146] [1938] USSC 83; (1938) 303 U.S. 453, at pp. 466, 467 [82 Law. Ed. 954, at pp. 960, 961].
[147] [1920] HCA 54; (1920) 28 C.L.R. 129.
[148] [1941] HCA 20; (1941) 65 C.L.R. 255.
[149] [1920] HCA 54; (1920) 28 C.L.R. 129.
[150] [1920] HCA 54; (1920) 28 C.L.R. 129.
[151] [1906] UKPCHCA 4; (1907) A.C. 81; 4 C.L.R. 356.
[152] (1920) 28 C.L.R., at p. 155.
[153] [1937] HCA 26; (1937) 56 C.L.R. 657, at pp. 697, 698, 701.
[154] [1939] USSC 60; (1939) 306 U.S. 466 [83 Law. Ed. 927].
[155] [1941] HCA 20; (1940) 65 C.L.R. 255.
[156] (1928) 42 C.L.R., at pp. 206, 207.
[157] (1939) 61 C.L.R., at pp. 772, 773.
[158] (1940) A.C., at p. 849; 63 C.L.R. at p. 341.
[159] (1930) A.C. 357.
[160] [1940] UKPCHCA 3; (1940) A.C. 838; 63 C.L.R. 338.
[161] (1940) A.C., at pp. 856-858; 63 C.L.R., at pp. 347-349.
[162] [1916] HCA 36; (1916) 21 C.L.R. 433.
[163] (1916) 21 C.L.R., at pp. 440, 441.
[164] (1916) 21 C.L.R., at p. 441.
[165] [1916] HCA 36; (1916) 21 C.L.R. 433.
[166] (1916) 21 C.L.R., at pp. 453, 454.
[167] (1916) 21 C.L.R., at p. 455.
[168] (1916) 21 C.L.R., at pp. 457, 458.
[169] [1941] HCA 20; (1941) 65 C.L.R. 255.
[170] (1916) 21 C.L.R., at p. 443.
[171] (1916) 21 C.L.R., at pp. 455, 456.
[172] [1940] UKPCHCA 3; (1940) A.C. 838; 63 C.L.R. 338.
[173] (1940) A.C., at p. 854; 63 C.L.R., at pp. 345, 346.
[174] (1906) A.C., at p. 367.
[175] (1916) 21 C.L.R. 43.
[176] [1916] HCA 36; (1916) 21 C.L.R. 433.
[177] [1915] HCA 60; (1915) 20 C.L.R. 299.
[178] (1916) 21 C.L.R., at pp. 443, 444.
[179] [1916] HCA 36; (1916) 21 C.L.R. 433.
[180] (1916) 21 C.L.R., at p. 460.
[181] [1920] HCA 54; (1920) 28 C.L.R. 129.
[182] (1920) 28 C.L.R., at p. 154.
[183] (1924) A.C. 328.
[184] (1932) A.C. 41.
[185] (1939) A.C. 117.
[186] [1940] UKPCHCA 3; (1940) A.C. 838; 63 C.L.R. 338.
[187] [1908] HCA 43; (1908) 6 C.L.R. 41.
[188] [1923] HCA 4; (1923) 32 C.L.R. 68.
[189] [1939] HCA 27; (1939) 61 C.L.R. 735, at p. 763.
[190] (1932) A.C. 514.
[191] [1940] HCA 13; (1940) 63 C.L.R. 278.
[192] (1932) A.C., at p. 521.
[193] [1920] HCA 79; (1920) 29 C.L.R. 1.
[194] (1941) 65 C.L.R., at p. 268.
[195] (1941) 65 C.L.R., at p. 278.
[196] [1916] HCA 36; (1916) 21 C.L.R. 433, at p. 455.
[197] (1923) A.C. 695, at p. 706.
[198] [1920] HCA 54; (1920) 28 C.L.R. 129.
[199] (1920) 28 C.L.R., at p. 154.
[200] [1920] HCA 54; (1920) 28 C.L.R. 129.
[201] [1916] HCA 36; (1916) 21 C.L.R. 433.
[202] [1937] USSC 80; (1937) 301 U.S. 1, at pp. 45-48 [81 Law. Ed. 893, at pp. 916-918].
[203] (1906) A.C. 360.
</html</htm