New South Wales v Commonwealth [1908] HCA 68

New South Wales v Commonwealth [1908] HCA 68 - HCA 1908 case summary — Zoe

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appropriation does not create expenditure. At any rate there H.C. or A. has been no such appropriation in Acts Nos. 18 or 19 of 1908 as to a. create expenditure. Those Acts are not in fact Appropriation Seer Acts for they merely transfer money from one government Aaweseues account to another. Whatever is the meaning of " expenditure," Fase there has been none here, for all that has been done is that a moxweautn. mere book-keeping entry has been made. The Treasurer may close the account at any time he pleases, and the money there- upon becomes a part of the Consolidated Revenue Fund. An appropriation may be made when the money appropriated is not in the Treasury. How then can appropriation be expenditure ? A sum so appropriated could not be deducted from revenue to arrive at the balance payable to the States. The strength of the case for the defendants is said to be that the argument for the plaintiffs denies to the Commonwealth Parliament the exercise of the usual and ordinary power of Governments to accumulate revenue for anticipated expenditure. It is not a usual and ordinary thing for a Government to set aside surplus revenue and call that setting aside "expenditure." The relation of the States and the Commonwealth in respect of surplus revenue bears a close analogy to that of principal and agent, and the duty under secs. 89 and 93 of paying to the States is the same as that of an agent who is directed to pay to his principal the balance of his receipts over expenditure on account of the prin- cipal. See. 4 (4) (d) of the Surplus Revenue Act 1908 is either ultra vires or futile. (Grirrita C.J. - In making a new provision as authorized by sec. 94 of the Constitution the Parliament may use the word " expenditure " in a different sense from that in which it is used in the Constitution. That is not attempting to extend the meaning of the word in the Constitution.] Reading secs. 93 and 94 of the Constitution together, what the Parliament was authorized to do was to alter the basis upon which the surplus revenue had to be accounted for to the States, and to adopt any mode of distribution it should think fit. But in some shape or form the Commonwealth must account for the surplus revenue, and must account for it monthly. The Parlia- ment cannot cut down the rights of the States under sec. 94, and

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The claim was further supported by a contention that these sums could not be debited to the several States in view of the terms of secs. 89 and 93, so far as they are repeated by sec. 4 of the Surplus Revenue Act passed under the power given in sec. 94. Only an exact cash balance, and one to be made up and handed over monthly ad wnguem, could, it was urged, satisfy the sections. No expenditure could be debited except money actually spent, and every penny spent must be debited in the same month, with the résult that in the present case the disputed money, not having been disbursed last June, could not be debited in that month, therefore it must not be debited at all, and therefore, again, it must be made available to the States under sec. 4 (3) of the Surplus Revenue Act 1908. Taking it as a matter of course that the Surplus Revenue Act uses the words of the Constitution in this behalf in their original meaning, we must start with the clear presumption that the framers of the Constitution had no intention to make an unworkable instrument of it. If a literal construction would have that unreasonable effect, and a more reasonable one is equally open, the latter should of course be adopted, ut res magis valeat quam pereat. Now, the construc- tion contended for is plainly unreasonable. It would mean that in some months, when receipts fell below federal disbursements, the federal Treasury would have a debit balance, and therefore could not give the States anything with which to meet their needs. On the other hand, when the Treasurer found that he had received in a month a vast sum more than he had actually paid out for the purposes of the Commonwealth, he would have to pay the whole excess over to the States at once, knowing, perhaps, that there were millions to be met the next month and ew hypothesi a depleted Treasury to face them. So the attempt to act on an exact monthly cash basis would, instead of easing finance, lead to the alternate embarrassment, more or less acute, of abundantly solvent authorities. We must also suppose, if the construction contended for is correct, that in choosing the old basis of bookkeeping practically as it stood, the federal Parlia- ment, having a free hand to legislate within sec. 94, deliber- ately chose to hamper and injure itself and the States - the one as much as the others - by such a process. Now, it

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will be observed that it is not the literal direction of see. 89, on which the whole contention is based, that the eredits and debits are to be made in this arbitrary fashion, The Common- wealth is not bound to make its debits at any stated time. Why may it not defer a debit - a bookkeeping entry - from one month, when it would have the effect of dislocating the whole financial system, to another, so that transactions may pro- ceed smoothly - always supposing that Commonwealth and State each get their own - the Commonwealth its expenditure by debit- ing it at the time when it may justly do so, and the State its revenue from Commonwealth sources by a monthly payment of the excess of credits over debits? Are the hands of the Com- monwealth to be tied thus against the interests of all concerned, and is that the intention of sub-sec. 11. of see. 89 or of sub-see. (8) of sec. 4 of the Surplus Revenue Act? We may be sure that the process to which it is intended to give further life by the last mentioned Act has never been such as is contended for. The Constitution does not render the Commonwealth the mere agent of the States to handle certain of thei revenues and to have a dole for its work. That is not any part of the purpose of a national Government, especially of one to which the Customs and Excise are assigned with exclusive legislative and executive con- trol as to imposition, collection and management. As well might we foster the assumption that exists in some quarters, that the Commonwealth is an alien body without rightful foothold on Australian soil, lacking citizens to enjoy the national protection and defend the national rights. When the Constitution speaks of revenues of the Commonwealth it means revenues which belong to the Commonwealth, although it cast upon Australians collectively the duty of providing out of their annual revenue for the political needs of large bodies of their number resident in the several States. The money appropriated from the Con- solidated Revenue Fund, withdrawn from the Treasury and paid to the credit of the two trust accounts (see special case paragraph 8) was in my judgment expenditure within the mean- ing of the Constitution. It was lawfully devoted to the purposes expressed. While the appropriation stood it could not lawfully be devoted to any other purpose, though its disbursement.

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Judgment (161 paragraphs)