Austin v The Commonwealth of Australia - [2003] HCA 3 - HCA 2003 case summary — Zoe

CTHHCA

Austin v The Commonwealth of Australia

[2003] HCA 3

High Court of Australia|2003-02-05|Before: Gleeson CJ, Hayne JJ

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At a glance

Source facts

Court

High Court of Australia

Decision date

2003-02-05

Before

Gleeson CJ, Hayne JJ

Catchwords

Austin & Anor v Commonwealth

Source

Original judgment source is linked above.

Catchwords

Austin & Anor v Commonwealth

Judgment (313 paragraphs)

[1]

For the reasons that follow, the first question (about construction) should be answered differently in relation to each plaintiff - "Yes" in the case of the first plaintiff, "No" in the case of the second plaintiff. The second question (about validity) should be answered "Yes". The legislation is invalid. It exceeds that limitation on the legislative powers of the Commonwealth which flows from the very nature of the federal structure established by the Constitution.

[2]

The plaintiffs' pension entitlements [44]-[48] Federal superannuation legislation [49]-[52] The SASFIT litigation and s 114 [53]-[56] The superannuation guarantee legislation [57]-[58] The SIS Act [59]-[61] The surcharge legislation [62]-[67] The protected funds legislation [68]-[71] Federal unfunded schemes [72] The liabilities of the plaintiffs [73]-[74] The position of the second plaintiff [75]-[81] The position of the first plaintiff [82]-[91] Construction issues [92]-[110] Constitutional implications [111]-[115] Melbourne Corporation and discrimination [116]-[124] The scope of the doctrine [125]-[131] The United States decisions [132]-[135] The judgments in Melbourne Corporation [136]-[139] Taxation [140]-[142] Queensland Electricity [143]-[145] The later decisions [146]-[152] Conclusion respecting Melbourne Corporation doctrine [153]-[174] Other immunity issues [175]-[181] Arbitrary exactions? [182]-[186] Section 55 of the Constitution [187]-[201] Conclusions [202]-[204]

[33]

"This bill complements the surcharge legislation already passed by the parliament. The existing superannuation contribution[s] surcharge legislation imposes surcharge on superannuation providers. The legislation cannot apply to certain state superannuation funds because they are protected from revenue measures under the constitution. This bill strengthens the equity of the surcharge measure by ensuring that the surcharge will apply to all high income earners. … The collection mechanism under the bill is similar to that which applies to members of unfunded defined benefits superannuation funds under the [Surcharge Assessment Act]. The only difference is that the liability to pay the surcharge will rest with the member rather than the superannuation fund. The surcharge liability for a member for a year will be accumulated in a surcharge debt account, maintained by the Commissioner of Taxation, for the member and will be payable by the member when the member's superannuation benefit becomes payable. The member will have the option of paying off the debt as it arises once an amount of surcharge has been assessed." The emphasis upon strengthening the equity of the surcharge measure is indicative of a reluctance to admit of exceptions or qualifications to a particular revenue-raising policy. But the Constitution itself may require the allowance of exceptions. In that respect, attention was paid by the legislature to what was seen as the requirements of s 114. The plaintiffs submit that, as a result, the protected funds legislation implemented a different scheme from that in the Surcharge Imposition Act and the Surcharge Assessment Act. In particular, they point to the imposition of a surcharge not upon the superannuation provider, as with the general legislation, but upon members and to the apparent reason for this in a view taken as to the operation of s 114 of the Constitution. Whether that view, apparent from the Second Reading Speech, was soundly based may be open to question but should be acknowledged to the extent that it helps disclose the legislative purpose of the impugned statutes. However, what is at the heart of the present litigation is whether, in framing the laws in this form, there was a failure to have sufficient regard to another constitutional imperative, that expressed in the Melbourne Corporation doctrine.

[201]

Most commentators agree that the decision of this Court in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers' Case") dramatically extended the powers of the federal Parliament. First, the Engineers' Case held that the "one clear line of judicial inquiry as to the meaning of the Constitution must be to read it naturally in the light of the circumstances in which it was made, with knowledge of the combined fabric of the common law, and the statute law which preceded it". Second, the Engineers' Case rejected the doctrine of the immunity of governmental instrumentalities that had prevailed up to that time. Under that doctrine, the federal and State governments were seen as sovereign within their respective spheres of power and entitled to carry out their operations without legislative or executive interference from each other. Given that premise, the immunity was seen as arising from a necessary implication of the Constitution that prohibited the State and the federal governments from controlling the activities of each other. The genesis of the rule was a dictum of Marshall CJ, delivering the opinion of the United States Supreme Court, in McCulloch v Maryland. There, the Chief Justice said that "the States have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operations of the constitutional laws enacted by congress to carry into execution the powers vested in the general government". Marshall CJ saw the rule as a necessity in a federal system. Nineteenth century United States cases held that the prohibition was reciprocal. One year after the setting up of this Court in 1903, it applied the prohibition in favour of the Commonwealth in Deakin v Webb and in favour of the States in The Federated Amalgamated Government Railway and Tramway Service Association v The New South Wales Railway Traffic Employés Association. However, the Engineers' Case rejected the doctrine of immunity of instrumentalities and held that, with limited exceptions, every grant of power to the federal Parliament authorised laws affecting the operations of the States and their agencies. The exceptions concerned the taxation power and powers affecting the prerogatives of the Crown. Thus, the emphasis on the text of the Constitution and the rejection of the principles of implied prohibition and immunity of instrumentalities enlarged the power of the federal government to deal with matters affecting the States as well as enlarging its power generally.

[205]

"may be invalid in two classes of case, one, where the Commonwealth singles out the States or agencies to which they have delegated some of the normal and essential functions of government, and imposes on them restrictions which prevent them from performing those functions or impede them in doing so; another, where, although the States or their essential agencies are not singled out, they are subjected to some provision of general application, which, in its application to them, would so prevent or impede them." The issue of the Parliament's power to bind the States in respect of their functions arose again in Victoria v The Commonwealth ("the Payroll Tax Case"). Barwick CJ, with whose judgment Owen J agreed, saw the issue as turning on the characterisation of the federal law. In his view when a law is invalid because it interferes with the powers or functions of a State, it is because of "lack of an appropriate subject matter". Windeyer J rejected the characterisation approach. He said that the validity of such laws were to be decided by implications arising from the existence of the States as part of the Commonwealth. Those implications "relate to the use of a power not to the inherent nature of the subject matter of the law". His Honour said that a law, although made with respect to a designated subject matter, was not valid "if it be directed to the States to prevent their carrying out their functions as parts of the Commonwealth". Gibbs Jadopted the view of Sir Owen Dixon, that "a Commonwealth law is bad if it discriminates against States, in the sense that it imposes some special burden or disability upon them, so that it may be described as a law aimed at their restriction or control". However, his Honour went on to say that he was not disposed to agree that "a law which is not discriminatory in this sense is necessarily valid if made within one of the enumerated powers of the Commonwealth". He said that "[a] general law that would prevent a State from continuing to exist and function as such would in my opinion be invalid".

Austin v The Commonwealth of Australia

At a glance

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Judgment (313 paragraphs)

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Legislation Cited (31)

Cases Cited (1)