New South Wales v Commonwealth (No 1) [1932] HCA 7

recoupment - Whether @ law * for the carrying out by the parties thereto" of the March 17, 3

Financial Agreement between the Commonwealth and the States - The Constitution *"

463 & G4 Vict. c. 12), sec. 105a - Constitution Alteration (State Debts) 1928 Sypwzy,

s (No. 1 of 1929), sec. 2 - Financial Agreement Act 1928 (No. 5 of 1928) - Financial April 6, 21. Agreement Validation Act 1929 (No. 4 of 1929) - Financial Agreements Enforce- anent Act 1982 (No. 3 of 1932), Part I1. - Financial Agreements (Commonwealth Liability) Act 1932 (No. 2 of 1932). Starke; Dixon,

'The provisions of Part IL. of the Financial Agreements Enforcement Act

" 1932 are a valid exercise of the legislative powers of the Federal Parliament,

So held by Rich, Starke, Divon and McTiernan JJ. (Gavan Duffy C.J. and Byatt J. dissenting).

The State of New South Wales issued a writ against the Common-

• wealth of Australia and the Honourable Joseph Aloysius Lyons and jpoitier Ministers of State and Assistant Ministers of State of the
• Commonwealth of Australia, By the indorsement on the writ the _ Plaintift claimed (1) a declaration that the whole of the Financial ' "Agreements (Commonwealth Liability) Act 1932 and the whole of the

Financial Agreements Enforcement Act 1932 were ultra vires the Parliament of the Commonwealth and were invalid ; (2) an order to

restrain the defendants, their servants and agents, from acting or enforcing or putting into operation the provisions of the

restrain the defendants and each of them, their servants and from causing or procuring or taking any step towards causing procuring to be acted upon or enforced or put into operation provisions of the said Acts or either of them or any of such prov (4) an order providing for the costs of this action; and (5) s further or other relief as the nature of the case may require. Thew was indorsed for trial without pleadings. After the issue of the w Evatt J. granted the plaintiff leave to serve with the writ a noti that the Full Court would be moved for an interlocutory injuneti restraining until the hearing of the action the Commonwealth. its Ministers of State and their servants and agents (1) from upon or causing or procuring or taking any step towards caus procuring the making or publishing of or acting upon any pro tion under sec, 7 or any other provision of the Financial Agreen Enforcement Act 1932 in relation to New South Wales, or (2) in any way upon the passing of the resolutions of both Houses of th Parliament under sec. 6 of the said Act making the provisi secs. 7 to 13 inclusive or sec. 14 of the said Act apply in relation the said State, or (3) from acting in any way under the provis of sec. 15 of the said Act in relation to the said State.

The motion now came on for hearing before the Full Court of t High Court.

It was agreed during argument that the hearing of the motio should be treated as the trial of the action.

The States of Victoria and Tasmania obtained leave to interv

Browne K.C. (with him Berne), for the plaintiff, in support of motion for an injunction. The application is to restrain the Mi of State, their servants and agents, from issuing a proclamati under sec. 7 of the Financial Agreements Enforcement Act 19 pending the Court's determination of the validity of the Act. 1 Court has power to restrain the Ministers of the Crown from i a proclamation. If the provisions of the Act are followed, t

Commonwealth can seize the revenues of a State without the inter- 'position of any judicial proceeding. The Commonwealth cannot, simply by legislation, proceed to deprive a State of revenue where the State has had no opportunity of justifying itself and without the interposition of some judicial tribunal. The only authority which can be looked to in order to justify such a proceeding is sec. 105A of the Constitution (Constitution Alteration (State Debts) 1928, sec. 2). Sec. 1054 (5) makes the Financial Agreement a binding agreement both on the States and on the Commonwealth. This Agreement is enforceable in the same way as any other agreement. [Counsel referred to The Commonwealth v. New South Wales (1).] 'Sees. 64-66 of the Judiciary Act 1903-1927 were provisions whereby sec. 1054 of the Constitution was made applicable for enforcing contracts between States and the Commonwealth. As to claims between the Commonwealth and a State the ordinary machinery of the Courts is provided, and that should have been resorted to by the Commonwealth. In sec. 105a of the Constitution the expression "carrying out'? means performing, and not "enforcing," the agreement, and does not extend to punishment or seizure of revenue. The States exist under a system of responsible government, and under the present legislation the Commonwealth may, without hearing a State, render it unable to carry on its essential services. 'See, 105a does not provide a new method of enforcement but deals with carrying out the agreement by all the parties. This may relate to the performance of numerous minor matters which might arise during the period of fifty-eight years, which is the duration of the Agreement. It is not reasonable that the whole scheme of judicial enforcement should be superseded by the few words in sec. 105a. If sec. 105a is to have the meaning claimed for it, it would be expected that the matter would have been stated with greater explicitness than was used in that section. As soon as the resolution under sec. 7 of the Financial Agreements Enforcement Act is published 'the moneys specified become payable to the Treasurer of the Commonwealth. The resolution covers all persons liable to pay 'money to the State of New South Wales. When the proclamation is published under sec. 7 of that Act, the Act diverts the specified

H.C. or A. revenue, which should have been paid to the New South i ee Treasury. The Auditor-General of the Commonwealth does New Sour represent the States at all, and to his arbitrament the States

Wares never assented, and it is on his statement that the whole proceeding

Comité, are founded, and it is on his statement that the people of New Sout Tron Wales are not to pay taxation to the State or to any State o}

• To make the Act go on operating, nothing is necessary but certificate from the Auditor-General of the Commonwealth which may }

issued indefinitely, and the intervention of Parliament is not ey necessary. While the proclamation is current the whole re

of the State may be intercepted on the mere issue of certificates of

the Commonwealth Auditor-General. Apart from sec. 105a of the Constitution there is no power which can support such legislation

[Counsel referred to the Financial Agreement Validation Act 19

and the Financial Agreement Act 1928.] The Constitution of th Commonwealth is divided into legislative, executive and judicis functions, and placitum 51 of the Constitution delimits the powersd

the Commonwealth Parliament, and these powers are subject to

the Constitution. The States knew that they were dealing

stitution. The Commonwealth Parliament never had power to enforce agreements to which it might be a party except throug judicial tribunal, and all the parties would assume that if the were to be any question of enforcement it would be by judi process (New South Wales v. The Commonwealth (1)). Not only wer the States dealing with that Constitution, with whose method of judicial process they were acquainted, but all the State were States with responsible government (Amalgamated Society Engineers v. Adelaide Steamship Co. (2)). The dispute i between the Commonwealth, on the one hand, and States responsible government, on the other. It is not enough to remem that the States are co-equal with the English Parliament; but i is necessary to remember that the Parliament of a State is

only authority that can appropriate the revenue of that State. See. 75 (u11.) of the Constitution is the only authority which empowers the Commonwealth to sue a State (The Commonwealth v. New South Wales (1) ). After judgment is obtained under sec. 75, enforcement of that judgment is dealt with by sec. 64 et seq. of the Judiciary Act. 'This procedure might have been followed to enforce the Financial Agreement. That was the state of the law at the date of the Financial Agreement with regard to agreements to which a State isa party. There is an implied term of the Agreement that if moneys are required to give effect to the Agreement such moneys can only be appropriated by Parliament itself (Australian Railways Union v. Victorian Railways Commissioners (2) ). Even if the State had been sued by the Commonwealth, the Judiciary Act provides how that judgment is to be enforced. Even if judgment were obtained against the State, the provision of money to meet that judgment was, in the last instance, in the hands of the State. If there is always that condition, still more must that be so where a party does not follow the procedure of suing and getting a judgment. It must always be in the hand of the State Parliament to provide the money. In this case there is no judgment, but only the certificate of the Auditor-General (Churchward v. The Queen (3)). When a person contracts with a State having responsible government, it contracts on the basis of Parliament finding the money to meet the liabilities of such State arising under such agreement. If a bargain had been made giving to the Commonwealth such power as the Commonwealth claims, it is difficult to believe that the agreement, if made, was couched in the language used in the Act (Rayner v. The King (4) ). If the wide meaning contended for is to be given to sec. 105a of the Constitution, it, in effect, repeals secs. 39 and 46 of the Constitution Act of New South Wales; and will enable the Commonwealth Parliament to amend or repeal the New South Wales Constitution, which is a consequence not to be expected. Time after time in Acts of the Commonwealth Parliament there occurs a provision, generally towards the end of the Act,

(1) (1928) 32 GLLAR., at p. 212. (3) (1865) LR. 1 QB. 173, at p. 209. go feft8) #4 CLAN, 919. at pp. 952, (4) (1930) NZL. 441, at p. 457.

H.C.orA. that the Governor-General may make regulations for ¢: Eas out or giving effect to provisions of the Act. It was for su

New Sour purposes as these that the words "for the carrying out," &c., were MA aS inserted, namely, to carry out matters which had not been worked ae out in detail or which had not been completely dealt with. It was

INo. I], that kind of thing that the parties had in mind when they used

• • those words, particularly in view of an agreement of this nature lasting for fifty-eight years. It is not an apt form of words to carry something far more important and that may be subversive of the whole of the Constitutions of the States. If the parties to the Agreement had meant to give effect to such a drastic change, it would have been more clearly expressed. The interpretation sought to be put on this Agreement enables the Commonwealth to make laws imposing obligations on the other party to pay money to the Commonwealth. There is nothing in the Agreement which comes within reasonable distance of that. One consequence of the Act is that it imposes obligations on persons not parties to the Agreement, namely, the citizens of New South Wales. The parties to the Agreement must have known that there was machinery existing which would enable the parties to enforce the Agreements.

The narrower meaning should be given to the clause (Caron y. The King (2)). It must have been within the contemplation of the parties that the States would continue to exist as States, and that one party was not to exercise its powers so as to destroy the other.

C. Gavan Duffy, for the States of Victoria and Tasmania intervening. Sec. 6 of the Financial Agreements Enforcement Act is distinct from the rest of the Act, which contains machinery provisions. The Act is ultra vires altogether whether the process of execution is put into operation before or after judgment. If there were a plain, definite power given to the Commonwealth, it would not matter what hardship was imposed on the States or their subjects; but the hardship of these provisions should not be entirely overlooked,

(1) (1928) 41 CLR. 275. (2) (1924) A.C. 999, at pp. 1003, 1006,

'because the harshness of the results throws some light on the inter- pretation to be put on this clause. Sec. 15 would enable a mode 'of execution hitherto unknown in any British community for the 'enforcement of a judgment debt. That section, as it stands, could 'not be within the most extensive power to enforce payments by 'States. Sec. 1054 of the Constitution is the only power which 'can be relied upon. Sec. 105s, without some ancillary power, 'cannot possibly be sufficient, because the power given is to make Jaws for carrying out any such agreement, and what is ordained by 'the Financial Agreements Enforcement Act certainly is not carrying 'out the agreement between the parties. Intercepting money before 'it reaches the hands of the State is no part of carrying out the 'agreement made. The parties never agreed to such means of enforcement. Neither is there a necessary implication. In the 'ease of subjects, if the Commonwealth were given power to make laws for carrying out a contract, there would be an implication 'to do what was here done in the case of an individual on the breach of contract. While such an implication may be properly 'made in the case of subjects, it cannot be made in respect of an agreement made between the Commonwealth and the States. Tn order to say what implication should be made it is proper first to look at the words of the power, but to look at those words in the light of the reason for the grant of the power and for the change of the Constitution, &c. There is one circumstance which should be given close attention; that is, that this change in the Constitu- tion is a very unusual one. Another reason why the Court should not imply this power is that up to the time when this section came into operation there was no case in which execution was leviable against the State. That judgment against a State could be enforced by way of execution was unknown (Australian Railways Union v. Victorian Railways Commissioners (1) ). No express power can be called in to support the Federal Act. An ancillary power must be relied upon. In considering power, whether express or implied, it is proper to go to the surrounding circumstances, and here the important matter is the genesis of the Agreement. The Agreement is one imposing obligations: when power to carry

out the Agreement is given, would that mean power to enfore Agreement as is given by this Act? This Act gives power to Commonwealth to choose which of the States were to be coerced into compliance. Powers which can properly be regarded as, incident depend very much on the circumstances of the case (s of Tasmania v. The Commonwealth and State of Victoria ir ,

parties to carry out the Agreement. It may be that it was thoug that if the Commonwealth was permanently to take over th debts of the States some laws would be necessary to enable the permanent steps to be taken. Therefore, it was thought imp that the Agreement should be permanently carried out. So change in the Constitution was made. It would be stretching | words of sec. 105a to say that the Agreement could not be enfore without compulsive powers. It might be convenient to have them but the Agreement could be carried out without them. The wor of sec. 105a are capable of being aimed at more than one obje Even if the words of sub-sec. 3 are such that it would be reasonabl to infer remedies for breach of contract, that ought not to be d in the case of a State. The state of the law in force at the ti the Agreement and of the alteration in the Constitution should b taken into consideration. One of the important matters in the Stat Constitution was complete control by the State over its own finance Process to seize State revenue and process to satisfy obligations unknown in Victoria and in England. Before such power shi be implied very plain words must be found. If power to execut against revenues of the State is given it must be granted in e terms. Australian Railways Union v. Victorian Railways Co sioner's (2) shows a strong leaning towards the view that a p to enforce awards against a State under the arbitration powers void. This shows that there should not be implied an ant power to give relief when one of the parties has broken the contra¢ If such power were to be implied, it would be much easier to in

(1) (1904) 1 C.LLR, 329, at p. 338. (2) (1930) 44 C.LR., at p. 352.

it in the case of the Railways Union than in the present case. Sec. 105a (3) of the Constitution should not be read as giving any eompul- sive power at all. Its natural meaning, in the circumstances, is such that it does not include any compulsive power at all, and the circumstances surrounding it are such that the Court should not imply any compulsive power. If all these reasons were not sufficient to induce the Court to say that the compulsive powers should not be implied, there is another reason, namely, that under see. 106 of the Constitution there are rights preserved to the States and _ before these rights are taken away, i.e., before the power of the State to control its own revenue is taken to be overridden by some Federal power, that power ought to be clearly expressed in the Federal Constitution. Even if sec. 105a (3) enables execution to be i enforced it does not enable the Federal Parliament to discriminate

between different parties to the Financial Agreement. If any power ; to effect execution were given, such power was given only to make general rules for enforcing execution. Sec. 5 of the Financial Agreements Enforcement Act shows that enforcement of the Act _ depends on a judicial finding. When proceedings are taken otherwise than under sec. 6, it is necessary to approach the Court before _ anything can be done ; but under sec. 6 a State's property may be , - intérfered with without the intervention of the Court at all, In the case of sec. 6 the duty entrusted to the Auditor-General is a judicial f duty. The Commonwealth has based its whole proceedings upon _ obtaining a decision of the Auditor-General, and the giving of his certificate is a judicial proceeding (R. v. Electricity Commissioners ; _ Bx parte London Electricity Joint Committee Co. (1); Williamson v. we Ah On (2); Ex parte Walsh and Johnson; In re Yates (3) ). i BLM. Mitchell K.C. and Wilbur Ham K.C. (with them O'Bryan), for the defendants, to oppose the motion.

~ _- EB. M. Mitchell K.C. The first question to consider is the correct

construction of sec. 105a (3) of the Constitution. The Financial Agreement was the largest, and involved the greatest, amount of

(1) (1924) PIKB.171, at p. 206. (2) (1926) 39 CLR. (3) (1925) 37 G.LR. 36, at p. 50,

1932, Ww New Sours WatesTHe Commoy- WEALTH (No. 1].

money of any transaction ever entered into in Australia, and involved both the internal and the external debts of the States. Not only did the Commonwealth assume liability for those debts, but it was also bound to arrange for redemptions, conversions, consolidations and renewals after it took over the obligations of the States. Is it reasonable that the Commonwealth should have taken over all those liabilities without having any recourse to the States - leaving the States in a position that they would pay if they chose? In theconstruc- _ tion of this sub-section, is it to be assumed that the Commonwealth has taken over these large responsibilities without any right to recoup itself against the States? The Commonwealth is bound to meet the obligations of any State to maintain the credit of the other States in Australia. In return for assuming these obligations the Commonwealth received the States' promises that they would pay interest. The words in sec. 105a (5) "every such agreement:

shall be binding upon the Commonwealth and the States" mean that the Agreement shall be obligatory and enforceable. This clause places the Agreement above the Constitution and above the States: whatever clauses there are in this Agreement, if they involve payment of money, they are obligatory and binding notwith- - standing anything in the Constitution of the Commonwealth or of the States. Whether the State Parliament appropriates or does not appropriate money to meet its obligations has no effect on this Agreement at all. Sec. 1054 (3) should be construed as supporting j the compulsive or coercive powers. Sec. 105a (3) includes power to pass laws for the enforcement of the Agreement against both States and Commonwealth, and it is not unreasonable that the States should give power of enforcement to the Commonwealth. It was almost necessary that the Commonwealth should have some powers to enforce redress, and, assuming that some right of redress and enforcement was contemplated, it would in the circumstances of the case be left to the Commonwealth. If sec. 105a (3) does not embrace measures for enforcement, then it has very little value or meaning. If sec. 105a (3) relates only to matters incidental to carrying out the Agreement, it was not necessary because the incidental powers of the Constitution enable the Commonwealth Parliament to legislate for anything incidental on its part, and the

States can pass laws to carry out the incidental powers on their H. ©. or A. part. In view of the huge responsibilities the Commonwealth took ca over, it is incredible that the Commonwealth would leave itself New Sours without any means of enforcing the Agreement, and if the Common- . oe wealth had to depend upon an appropriation by a State before it ¢,1%™ could recover, it might have no remedy to set off against the WEALTH

liabilities of the States which it had undertaken. When the amend- ~-! ment of the Constitution was considered, it is probable that the case of Commonwealth of Virginia v. State of West Virginia (1) was in mind. Sec. 5 of the Financial Agreements Enforcement Act added new remedies which are in aid of the judicial power. The certificate of the Auditor-General is merely a matter which is brought to Court in order to facilitate proof. That section simply added new remedies. The words of sec. 5 are apt to indicate one thing only, namely, that carrying out by the parties means performance by the parties. If " performance " were used instead of " carrying out," it would not be reasonable to attribute any other meaning than that contended for. In the circumstances of the case and on the text of the language any other meaning than " performance of obligations" would not satisfy the words of the section. Sec. 105a of the Constitution makes the Agreement binding; if it is binding it is enforceable, and its primary meaning covers performance by the parties of their obligations. The powers of enforcement given by sec. 105a (3) are not limited to the actual terms of that section. Sec. 105 is free from the objection that State revenue cannot be intercepted without parliamentary appropriation. The Financial Agreements Enforcement Act also comes within the incidental power of sec. 51 of the Constitution for the purpose of making effective the judgment of the Court. Sec. 6 of the Financial Agreements Enforcement Act resembles the old writ of extent. If sec. 105a (3) includes a power to enforce, it includes a power to make a law to enforce in this way, and includes means which are appropriate and usual. It may be important to consider whether the means adopted were a well-known means (R. v. Hornblower (2) ).

Wilbur Ham K.C. A general view of sec. 105a of the Constitution, and more particularly of sub-sec. 3, must be taken at the outset.

(1) (1918) 246 U.S. 565, at pp. 601, 603. (2) (1822) 11 Price 29, at pp. 45, 46

H.C. or A. The questions which arise in this case are as follows : - (1) As to

the words "carrying out" in sec. 105a (3) - is the sub-section confined to incidental matters to implement the Agreement, or doe it extend to coercive measures that when given effect to result in the Agreement being carried out? (2) As to the words "by the parties" - must the laws operate directly on the parti only, i.e., some supposed entities properly described as "the King in right of the State," or does it extend to the people of th States who in their political organization have agreed to become parties to the Agreement ? (3) If the power is coercive, will the Courts examine the wisdom, justice or policy of the means adopted by the Legislature ? (4) Are coercive measures limited to proceedings in Courts and attempted execution of judgments? (5) Are measures of execution prior to a judicial determination right so unusual as to be excluded from the general power? (6) Does the Act purport by the Auditor-General's certificate to determin: the State's liability or the quantum of the Commonwealth's rights, or does it merely limit the amount of money it may take in charge' pending the determination of its rights by the Courts? (7) Does not the Agreement itself, by Part IV., clause 1, provide that the Auditor- General's certificate is to be conclusive as to the " amount and matter" stated in the certificate? (8) Is there any attempted usurpation of judicial power ? - this is intended to cover both "persons" and "matter." (9) Is there any unauthorized invasion of the States' Constitutions? (10) If sec. 105a (3) is limited to measures to implement the Agreement and provide in detail for what is provided for in the Agreement itself only in general terms, does not the Enforcement Act so provide for the indemnity contained in Part IV., clause 3, of the Agreement? As to questions 1 to 3 - The only means of paying the bondholders was out of revenue, by collections and due payment by the States. No incidental power i called for to enable the Commonwealth merely to implement thi Agreement. All incidental powers were given by secs. 105a (1) am 105a (5) and sec. 51 (xxx1x.). The Commonwealth must have recog- nized that it would be necessary to repose in some body a power to compel performance of the Agreement. These provisions cannot be made permanently effective unless there is somebody in whom tl

lis the power to enforce compliance. Effective performance is to be ©. oF A.

seoured by the means adopted to " carry out " the Agreement (Mur-

vay's Lessee v. Hoboken Land and Improvement Co. (1) ). Coercive New Sovrm

\powers are only one means of securing effective performance (Virginia w. West Virginia (2)). The Virginia Case shows that the words " carry put" are wide enough to cover effective means to coerce performance. (Sec. 105a (3) presupposes an agreement made, i.e., a valid agreement ymade, and provides that laws may be made for carrying it out. \This cannot be construed as directed to enabling the Federal Legislature to pass a law authorizing the Commonwealth or the States to enter into an agreement, or ratifying one entered into. Therefore sub-sec. 3 goes beyond mere authorizing or validating an Agreement. The Commonwealth is under a legal obligation to pay the bondholders under the Agreement itself and also under sec. 105a (5). The bondholders could sustain an action against the Commonwealth under this sub-section. But even if not liable to the bondholders, the Commonwealth was under a legal obligation to the States to , pay the bondholders, and this is not subject to a condition precedent jthat the States pay. Repudiation by one party is not a ground for the Commonwealth rescinding its part of the Agreement. Coercive measures are just as much for the benefit of the States as for the Commonwealth, ie., money must be found from other States to meet the defaulting State's liabilities. The only protection to the "other States is that the Commonwealth should be able to enforce "the contract against the recalcitrant States. The Commonwealth s the only available person to have a power of enforcement, and the

; wg used are apt to express this power. The words of sec. 1054 "(8) are intended to describe not the persons who are to be affected "but the area over which the laws are to be effective. The operation 'of the laws of the Commonwealth covers the citizens of the States. the Commonwealth Parliament has passed no laws to carry out

n ital matters, but it has passed laws to carry out a variation 'of the Financial Agreement, which variation actually affected all the 'sitizens of all the States. This is not a claim for damages for breach 'of contract, but is an attempt to compel performance. As to 'Questions 4 and 5 - Distress is a well known extra-judicial remedy

y (1) (1855) 18 Howard 272, at p. 281, (2) (1918) 246 U.S, at p. 601. f

(see Halsbury, vol. x1., pp. 117, 217, 218; Willoughby on Constitution of the United States, 2nd ed., vol. 11, p. 1883; vy. Mullins (1); Murray v. Hoboken (2) ). If the certificate of t Auditor-General was erroneous the action would not be justifie and the State would have its full remedy. If it is right there w be no wrong and, therefore, no remedy (Phillips v. Commissi Internal Revenue (3) ). There being a complete obligation on th States to pay this money, if the Commonwealth is only entitle as against the States to get a judicial obligation to pay i it only gets one right substituted for another right. This e judicial method has been applied in America against ban accounts (Freund on Administrative Powers over Persons @ Property, ch. X., at pp. 197, 200, 568). As to the applica of the writ of extent in England, see Encyclopedia of 1 Laws of England, 2nd ed., vol. v., pp. 628-629. These ca illustrate the Crown's remedy to collect money where comparati small sums of money are involved. This is a far less string procedure than a writ of extent. Sec. 6 of the Act is intended on to be a complement of sec. 5 in cases of urgency and where there a danger of the Crown's remedy being lost unless some steps taken to protect the Crown's remedy. Similar provisions are tained in the Customs Act 1901-1923, secs. 167, 203, 22 and the Excise Act 1901-1923, secs. 93, 96, 97,116. As to que tion 6 - The words "judicial power" are defined in Hi Parker & Co. Pty. Ltd. v. Moorehead (4), cited in Shell Co Australia v. Federal Commissioner of Taxation (5). The A dit General's certificate is merely something which informs the ment of the default and the amount of it, and limits the amoun money which may be taken in charge pending the determinat tio the matter by the High Court. The Auditor-General is concel to look only at the Financial Agreement, and he is not to take account matters such as set-off as long as it does not arise un the Agreement. Sec. 5 of the Act is not invalid because there attached to it a novel method of executing a judgment of the B

(1) (1898) 171 U.S. 404, at p. 413. (4) (1909) 8 C.L.R. 330.

(2) (1855) 18 Howard, at pp. 275, (5) (1981) A.C. 275, at p. 2055 277-278, 280, 281-283. C.LR. 530, at p. 542.

Court, and the steps referred to in sec. 5 are incidental to the H- ©. oF A. judicial power and authorized under sec. 51 (xxxrx.) of the Con- es

stitution. So far as the steps are authorized by sec. 6 they are New Sovru also incidental to the executive power. In the ordinary course ag of executing any judgment it is in the hands of the Executive to ,, 18%

say how the judgment is to be executed. The actual enforcement {Nel of a judgment is carried out by the executive arm, and sec. 5 is no - _ more than an attempt to give a more effective procedure for carrying out a power that would otherwise be in the hands of the Executive. The Auditor-General' certificate does not give any right at all. Itis only prima facie evidence and there is no attempt to make it con- clusive. As to question 7 - It is clear that each State should pay to the Commonwealth the amounts paid by the Commonwealth on behalf of the States. Part IV., clause 1, of the Financial Agreement goes beyond the heading, and it is not limited by that (Union Steamship Co. of New Zealand v. Melbourne Harbour Trust Commissioners (1) ). As to question 8 - There is no usurpation of judicial power and no judicial power is vested in any person other than the Court. As to question 9 - There is no unauthorized invasion of the State Constitu- tions (Australian Railways Union vy. Victorian Railways Commis- _ sioners(2)). Sec. 1054 makes the Financial Agreement binding _ notwithstanding anything in the Federal Constitution or in the Con- stitutions of the States. As to question 10 - An indemnity is given, and the Enforcement Act provides in detail for an indemnity by the Commonwealth. Unless the Agreement can be enforced the _ Commonwealth would have to borrow to meet the liabilities of the defaulting State. It could not free itself from this liability, and the whole of the burden would be thrown on the Commonwealth and the ; remaining States indefinitely. The Commonwealth is under a legal _ liability to the States to pay, whether it is under a legal liability to the bondholders or not. The true position is that the grant of judicial power carries with it, as implied in the grant, power to execute _ its judgments, and so far as that implied power is concerned it may be that the persons who are executing that judgment may not be officers of the Court. Where, as in sec. 51 (Xxx1x.) of the Constitu- tion, there is power to pass laws incidental to legislation, the execution

• (1) (884) 9 App. Cas. 365, at p. 369, (2) (1980) 44 CLR. 319, 'VOL, XLVI, 12

wealth. The incidental powers of the Constitution can be used to support these provisions (R. v. Kidman (1) ). There is, by | mere grant of the power, everything which is necessary for th proper exercise of the function (Griffin v. South Australia (2);

weaLt - Stemp v. Australian Glass Manufacturers Co. (3); Le Mesurie

[No. 1]. ites v. Connor (4)). Not only has the Court power to execute it

own judgments but under the Constitution it is part of the duty of the Legislature to execute its laws. The Court is not restricte by the preamble, and the name of the Act, &c., in construing it and can call in aid powers other than those in sec. 105a (3) (Ex pa Walsh and Johnson (5) ). There is an absolute obligation on th Commonwealth to make these payments, and there is no condition precedent to that liability that the States shall pay.

C. Gavan Duffy, by leave, referred to the following cases: Stemp v. Australian Glass Manufacturers Co. (6); State of Tasmania v. The Commonwealth and State of Victoria (7); Australian Railways Union v. Victorian Railways Commissioners (8); Alcock v. Fergie (9); Fisher v. The Queen (10); Manchester Ship Canal Co. v. Manchester Racecourse Co. (11).

'April 6. Gavan Durry C.J. The Court has considered this case and has reached a conclusion which I shall now state. The mem- bers of the Court will give their reasons on a later date. vat J. and I are of opinion that Part II. (Enforcement against State Revenue) of the Financial Agreements Enforcement Act 1932 is invalid. Rich, Starke, Dixon and McTiernan JJ. are of opinion that

(1) (1915) 20 CLR. 425, at pp. (6) (1917) 23 C.L.R., at p. 440-441, 449, 457. (7) (1904) 1 G.L.R., at p. (2) (1924) 35 C.L.R. 200, at pp. 205, & (1930) 44 C.L.R., at pp. 336, 352, 208. 389, 390. a) (1917)23C.LR.226,at pp. 241, (9) (1807) 4 W.W. & a'B. (L.) 285, p. 319. o (1929) 42 C.L.R. 481, at p. 497. **do) (1900) 26 V.LR. 781; 22 ALT,

(5) (1925) 37 C.L.R., at pp. 61, 108, ays (1903) A.C. 158, at p. 167. 110, 126-127, 134, (11) (1900) 2 Ch, 352, at p. 359.

Part II. (Enforcement against State Revenue) of the Financial H- ©. or A. 1Y:

Agreements Enforcement Act 1932 is a valid law of the Common-

wealth and that no declaration of invalidity should be made as News

claimed by the writ. Subsequently the following written judgments were delivered : -

Gavan Dourry ©.J. The Parliament of the Commonwealth, purporting to exercise the power conferred on it by sec. 105a (3), has enacted a statute, No. 3 of 1932, which enables the Common- wealth, on the failure by any State to make a payment prescribed by the " Financial Agreements " defined in the statute, to take from the taxpayers of that State moneys payable by them to the State in satisfaction of the payment which the State has failed to make. Sec. 1054 is as follows : - ''(1) The Commonwealth may make agreements with the States with respect to the public debts of the 'States, including - (a) the taking over of such debts by the Common- wealth; (b) the management of such debts; (c) the payment of interest and the provision and management of sinking funds in respect of such debts; (d) the consolidation, renewal, conversion, and redemption of such debts; (e) the indemnification of the Commonwealth by the States in respect of debts taken over by the Commonwealth ; and (f) the borrowing of money by the States or

by the Commonwealth, or by the Commonwealth for the States. (2) The Parliament may make laws for validating any such agreement _ made before the commencement of this section. (3) The Parliament "may make laws for the carrying out by the parties thereto of any ; suchagreement. (4) Any such agreement may be varied or rescinded hy the parties thereto. (5) Every such agreement and any such variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this "Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State. (6) The powers conferred by this section shall not be construed as being limited in any way by the provisions of section one hundred and five of this Constitution."

It will be observed that sub-sec. 1 authorizes the Commonwealth to make certain agreements with the States, but does not pretend

to authorize the States to make agreements with the Commonwea f The States must be authorized by their respective Parliam

binding upon the Commonwealth and the States parties th notwithstanding anything contained in the Constitution of Commonwealth or of the several States or in any law of the Parlia. ment of the Commonwealth or of any State. In my opinion th operation of sub-sec. 5 is this: If the Commonwealth and the State have in fact made an agreement the sub-section makes that agree valid though the parties or some of them had in fact no authorit to make the agreement ; and it preserves the valid existence of the agreement unless it is varied or rescinded under the provisions of sub-sec. 4. It does not alter the nature or incidents of the agreement, or affect the rights, obligations and duties of the parties under th agreement while it continues to exist. Let us now turn to sub-see. 3. It is said that the sub-section authorizes the enactment of

statute does not merely so compel. It furnishes the Commonw with means of obtaining from taxpayers who are no parties to th agreement moneys equivalent in amount to that which would hay been received by the Commonwealth from the State had it 0 failed to perform its obligations under the agreement. But is another answer. The sub-section does not authorize any coercion of the parties to the agreement. Sub-sec. 1 permits the Common

at all. If such parliamentary authority is required, sub-sec. permits it to be given by one particular Parliament, and that, Parliament of the Commonwealth. It is to be observed that th laws authorized by sub-sec. 3 are laws for the carrying out by th parties thereto of any such agreement. The Commonwealth i every case such a party, and if the sub-section authorizes an enf ment against the States it must also authorize an enforce against the Commonwealth by its own Parliament - a ¢

position. The truth is that the language of the sub-section is not apt to include a statute enforcing obligations against any of the parties to an agreement. It is also said for the Commonwealth that the statute which its Parliament has enacted may be supported by invoking other powers than that conferred by sec. 105a (3). The Commonwealth Parliament possesses a number of distinct powers, and if it does not specify which of those powers it proposes to exercise in any enactment, the validity of that enactment may be established by invoking any one or more of those powers. But if Parliament chooses to exercise one power, and one power only, its enactment cannot be supported by invoking another power. In this case it is clear to me from the recitals in the statute itself that Parliament intended to exercise the power conferred by sec. 105a (3), _and that power only ; and it is not for us to say whether it would "have been willing or not to exercise any other power if in fact it has not done so. But, as the other members of the Court have debated whether the statute in question is within any of the powers of the Commonwealth, I think it right to say that, in my opinion, having regard to the construction which I have already put on sec.

• 105a (5), no power is to be found in the Commonwealth Parliament to enact any substantial part of the statute. I think the plaintiff is entitled to a declaration, but, as the "decision of the Court is that the action should be dismissed, it is unnecessary for me to discuss what should be the exact nature of

' Ricu anv Dixon JJ. Sec. 5 of the Financial Agreements Enforce- "ment Act 1932 provides, in effect, that the Auditor-General shall certify to the Treasurer an amount of money then due and payable "anil unpaid by a State to the Commonwealth under or by virtue 'of the Financial Agreements, and that, after publication of the certificate in the Gazette, the Attorney-General may apply in a 'summary way to this Court for a declaration that the whole or part of such amount is due and payable and unpaid by the State to the Commonwealth. Such a declaration is to be enforceable as a judgment, " and shall, in addition to any other remedies for enforcing

such judgment by law provided, operate as a charge upon all the

1932, Ww New Sovrit WALES 'THE Comatox- WEALTH (No. 1].

New Sours of the Act in relation to revenues of the State which are specified in

pees the resolution. Thereupon those sections shall, to the extent of

INo I} The effect of secs. 7-13 is to create an involuntary assignment of

the specified revenues of the State to the Commonwealth during Rich J. ' - d Dixon J. period commencing at a date fixed by proclamation and ended by,

is made an offence for a Minister or other officer of a State to recei or permit to be received any such moneys or to give an indemnity in respect of any such payment. The Commonwealth is requi to apply the net amount which it receives after payment of expenses of collection in discharge of any liabilities of the State which have accrued under the Financial Agreements, and to refi to the State any amount received by the Treasurer under the A in excess of the liabilities of the State to the Commonwealth. When the liabilities of the State are discharged, the Auditor-General shall so certify to the Treasurer, and thereupon a proclamation to tha effect shall be issued by the Governor-General, and the period in which the provisions of secs. 7-13 apply shall cease.

In our opinion these provisions are valid. We think that they are within the power conferred upon Parliament by sec. 105a (3) of f the Constitution, and we also think that they are within the power derived by the Parliament from the operation of sees. 75 (IL) 51 (xxxrx.), and possibly sec. 78, combined with sec. 105a (}) Sec. 1054 was inserted in the Constitution by a proposed law approved by the required majority of the electors on 17th November 1928 and afterwards assented to. The amendment was passed by h Parliament and submitted to the electors in pursuance of

Financial Agreement made on. 12th December 1927 between

Commonwealth and the States, clause 2 of Part IV. of which provided that the Commonwealth would take the necessary action to submit to the Parliament and to the electors proposals for the alteration of the Constitution in the form in which sec. 1054 now stands. By that Agreement the Commonwealth agreed to take over the balance unpaid of the gross public debt of each State, and, in respect of the debts taken over, to assume as between the Commonwealth and the States the liabilities of the State to bondholders. The Common- wealth agreed to pay to bondholders from time to time interest payable on the public debts of the States taken over. Towards the interest payable by the States in each year it agreed to provide certain amounts, and each of the States agreed to pay to the Common- wealth the excess over the amounts so provided necessary to make up the interest charges on its public debt taken over by the Common- wealth. The Commonwealth and the States agreed to establish a sinking fund to answer the public debts taken over, and agreed that the contributions which they each undertook to make should be debts payable to the National Debt Commission. Each State agreed with the Commonwealth that it would by the faithful performance of its obligations under the Agreement indemnify the Commonwealth 'against all liabilities whatsoever in respect of the public debt of that State taken over by the Commonwealth. The Agreement further contained provisions for the control of future borrowing by the States and the Commonwealth, and of the conversion, renewal, redemption and consolidation of the public debts of the Commonwealth and of the States. As a consequence of these provisions any new securities required, whether upon a conversion or renewal of an existing loan or because of further borrowing, would be issued upon the credit of the Commonwealth. Inasmuch as the terms of this Agreement did not conform with sec. 105 of the Constitution, it was necessary before its permanent provisions could become operative that the powers of the Commonwealth should be increased. The Constitu- tions of the States contained nothing to prevent them, with the authority of their Legislatures, from entering into and carrying out the Financial Agreement. But under the Constitution of each of the States the pecuniary obligations of the States cannot be answered.

H.C. or A. out of the consolidated revenue except under parliamentary appro-

ter priation. The general doctrine is that all obligations to pay money

New Sourn undertaken by the Crown are subject to the implied condition that

bites the funds necessary to satisfy the obligation shall be appropriated

ae: by Parliament. Indeed, opinions have been expressed in this Court eer that, in the absence of any provision in the Commonwealth Constitu-

No. ft}. . . *, . - tion authorizing an impairment of this constitutional principle

bixonJ. embedded in the Constitution of the States, legislative powers

confided to the Commonwealth Parliament by sec. 51 of the Feder Constitution which otherwise extend to the operations of the States do not authorize the imposition upon the States of obligations which are not subject to the condition that funds shall be appropriated by the Parliaments of the States (see Australian Railways Union v. Victorian Railways Commissioners (1) ). If the liabilities which th States incurred to the Commonwealth under the Financial Agreement be subject to this condition, the power of the Commonwealth to exact payment would depend upon the action of the State Legis: tures. No doubt the Commonwealth might maintain a suit to enforce such an obligation in this Court ; for the matter would be one in which the Commonwealth was a party (sec. 75 (11.) ). But the obligation to be enforced would be conditional, and no judgment pronounced in accordance with the obligation could defeat the condition. The power conferred upon the Parliament by sec 51 (xxxrx.) to make laws with respect to matters incidental to the execution of any power vested by the Constitution in the Fede Judicature clearly authorizes laws for carrying into execution all the judgments which the judicial power has power to pronounce: (per Marshall C.J., Wayman v. Southard (2) ). But this would not authorize the Legislature to disregard the condition of the obligation which has passed into the judgment and enforce it as if it were unconditional. On the other hand, if the obligation incurred to the Commonwealth by the States be unconditional, and the Constitution of the State impose no obstacle to the assumption of an obligation which is absolute and independent of parliamentary appropriation, we can see no reason why judgment should not be given according

(1) (1930) 44 C.L.R., at p. 352, per Isaacs C.J., and at p. 389, per Starke J. (2) (1825) 10 Wheat, 1, at p. 22.

to the nature of the obligation, and why a law should not be made by the Parliament for the enforcement against the State of such a judgment. It is true that secs. 65 and 66 of the Judiciary Act 1903-1927 recognize the principle that the liabilities of the Crown in right of the States are subject to parliamentary appropriation of funds. This accords with the general character of the liabilities of the States usually put in suit. But we can see no reason why, if liabilities of an absolute nature are incurred by the States, the Commonwealth Parliament should not make a different provision. 'These considerations appear to us to be material to a proper under- standing of the constitutional alterations effected by sec. 105a. Sub-sec. 5 of that section provides with respect to agreements of the description contained in sub-sec. 1 that every such agreement and any variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution, or the Constitution of the several States, or in any law of the Parliament of the Commonwealth, or of any State. Tn our opinion the effect of this provision is to make any agreement, of the required description obligatory upon the Commonwealth and the States, to place its operation and efficacy beyond the control of any law of any of the seven Parliaments, and to prevent any constitutional principle or provision operating to defeat or diminish or condition the obligatory force of the Agreement. In 'the case of the States there is no constitutional qualification of the binding force of such an agreement to which the words " notwith- standing anything containedin. . . the Constitution of the several States" could more directly relate than that which requires parlia- _ mentary appropriation of funds to satisfy the condition upon which the liabilities of the States are incurred. In our opinion it follows that the Parliament can, in the exercise of the power given by sec. 51 (xxxix.), enable this Court, in a proceeding by the Commonwealth to recover money owing by a State to it under the Financial Agreement, to pronounce a judgment that is unconditional, and can enact laws for the enforcement of that judgment against the State. Sec. 105 arms the Parliament with further powers. Sub-sec. 3 provides that the Parliament may make laws for the carrying out by the parties thereto of any such agreement. In this sentence, we

Sovrn fulfilment by the parties. The considerations supplied by sub-see, 5

s the end or purpose, and the wo are equivalent to performance

again go far to determine the meaning and application of thi provision. The clause, in our opinion, authorizes the enactment laws calculated to bring about performance of their obligations by the parties ; laws to procure the fulfilment of the agreement. 1! words " the parties thereto' appear in sub-secs. 4 and 5 as well in sub-see. 3, and no doubt they are restrictive. They prevent power from extending to the regulation of matters which might be considered conducive to effectuating the purposes of the agreement although not directly relating to actual performance by the parti For instance, if the Commonwealth agreed with one State that money should be borrowed by them jointly at specified rates of intere the Parliament could not under this power legislate to preven competition on the money-market. But we cannot agree with the argument that the words "by the parties thereto" prevent Parliament from adopting measures for satisfying liabilities created by the agreement in default of literal fulfilment by the parties. A law which provides the alternative to voluntary performance by the parties and compels involuntary satisfaction appears to us to be properly described as a law for the carrying out by the parti thereto of the agreement. Two other meanings were suggested of sub-sec. 3. It was said that its purpose was to enable the Federa Parliament to establish later agreements as valid and binding j as sub-sec. 2 authorized the Parliament to validate the Agreement made before the commencement of the alteration. Among the many answers to this contention the shortest is, perhaps, that the words "carrying out" cannot mean creating or establishing agreement, but must mean acting under it. In the second place, was suggested that the provision was intended to enable Parliament to facilitate the carrying out of the agreement by empowering the parties to do things in performance of it which, in virtue of their Constitutions or otherwise, they were unable to do, or by making provision for matters which arose in the course of its: performance. It is difficult to see what legal disabilities could exist to impede the parties in the performance of such an agreement.

Subsec. 5 makes the agreement binding notwithstanding anything H. ©. or A.

contained in the Constitutions or laws of the States or the Common-

wealth, and whatever the parties must do by law they clearly may New Sours

do. Why the Parliament should need additional powers to provide for matters arising in the course of the agreement did not clearly appear; and we did not find it easy to apprehend the exact nature of the supposed problems which might arise in the course of perform- ing the agreement and admit of resolution by a power which on its terms could not add to or supplement the agreement, but could only provide for the carrying out thereof by the parties thereto. Moreover, it is evident from the terms of the Financial Agreement itself that, unless it is rescinded, no new agreement, as distinguished from a variation of the old Agreement, can be made for a very long time to come, because there can be little public debt of the States which is not comprised in the existing Agreement. Yet an examina- tion of the Financial Agreement failed, in our opinion, to disclose _ any important matter to which the power would apply if it received such a restricted construction. It appears to us that in the construe- tion of sub-sec. 3 the intention of sub-see. 5 to make the obligations of the Financial Agreements paramount should be of great weight, and when this is considered in relation to the magnitude of the financial liabilities of the States taken over by the Commonwealth and the plain dependence of the Commonwealth upon the performance by the States of their obligations under the Agreement to enable it to meet those liabilities, the meaning and purpose of sub-see. 3 are sufficiently clear. In our opinion it enables the Parliament to enforce performance by the States of their obligations under the Agreement, and it authorizes the main provision of the Financial Agreements Enforcement Act 1932, which is sec. 5. But we think that in the absence of sub-sec. 3, or, if a more limited construction of that

• sub-section were adopted, sec. 5 of the Financial Agreements Enforce- ment Act 1932 would, nevertheless, be valid. Sub-sees. 1 and 2 do no more than provide the preliminary conditions which must oceur before the jurisdiction of the Court can be invoked by the particular procedure prescribed by sub-secs. 3 and 4. Sub-see. 5 prescribes the number of Judges by which the jurisdiction may be exercised, and is supported as a valid law by sec. 79 of the Constitution.

Wates ®. THe Common- WEALTH (No. 1). Rich J. Dixon J.

Sub-sec. 6 is an exercise of the power conferred by sec. 51 (oxxrx, and, perhaps, of that conferred by sec. 78 (see The Commonwealth New South Wales (1)). Whenit enacts that the judgment shall operat as a charge upon all the revenues of the State, it might, if the obligation which the judgment enforced were subject to and qualified by a constitutional requirement of parliamentary appropriation, go_ beyond what was incidental to the exercise of the judicial power. But inasmuch as sec. 105 (5), in our opinion, makes the obligation - of the agreement absolute, it does no more than attach to the judgment a consequence which belongs to the enforcement of that obligation. Sub-sec. 7 then proceeds to enable the Houses of Parliament by resolution to bring into operation the provisions which _ effect an involuntary assignment of the State revenue. It is objecteil_ that the enforcement of the judgment is thus taken out of the hands - of the Court. Itis true that writs of execution issue out of the Court, but they issue as of course and more often than not they are directed to executive officers. The Court retains complete control of the judgment, and unless there be something in the conception of judicial power which confines all means of compelling obedience to the judgment to judicial action (and we do not think there is), there seems no reason why the Legislature should not make such provision as it thinks fit to ensure that the judgment is satisfied. Further, it ; appears to us that secs. 7-13 (1) do no more than provide means for working out the charge created by sub-sec. 6 of sec. 5. When brought into force they operate directly to transfer the revenue and, properly considered, they are provisions attaching to the judgment a legal consequence, the operation of which is contingent, however, upon the resolution of both Houses. The objection made that, according to" the title and recitals of the Act, it appears that the Legislature relied - upon and intended to exercise only the power conferred by sec. 1054, appears to us to be unsound. In the first place, we do not think an intention to exclude other powers is disclosed by the Act, and, in the next place, we think the observations of Rich J. and of StarkeJ. - in Ex parte Walsh and Johnson (2) respectively provide an answer to the contention.

(1) (1923) 32 C.ALR., at pp. 214-216, (2) (1925) 87 CLLR, at pp. 126-127, - 218-220, 134-135.

'The further objection that the real purpose of the Legislature was to enforce the agreement, and not the judgment as such, also seems to us to be misconceived. The motives of the Legislature are immaterial. What the statute actually does affords the real test of its validity, and sec. 5 provides for the ascertainment of a liability by the judicial power and attaches the consequences to the judgment. A separate question arises as to the validity of sec. 6. No doubt, as no proclamation has been issued* under sec. 7 based upon sec. 6, this is a matter of less practical importance than it might have been. Sec. 6 cannot be supported, in our opinion, as an exercise of the power to legislate upon matters incidental to the execution of any power vested in the Federal Judicature. Its validity must rest upon sec. 105a (3), or upon secs. 61 and 105a in combination with sec. 51 (xxxrx.). Upon the construction which we think sec. 105a (3) ought to receive, the question whether it authorizes sec. 6 depends upon what may be perhaps considered a refined distinction. If its application were contingent upon the existence in fact of an unsatisfied liability in the States to the Commonwealth, the construction which we have placed upon sub-sec. 3 of sec. 105a would clearly support the provisions of sec. 6. But it applies when the Auditor-General has certified that such a liability exists and the Houses of Parliament have adopted his certificate and passed a resolution in terms of sec. 6 (1). In other words, it is brought into operation upon a reasonable or perhaps vehement presumption of default which may, nevertheless, conceivably be wrong. The State may at once apply on three days' notice for a declaration that it is wrong, and, if the State does not so apply, the Commonwealth must apply within two months for a declaration that it is right. The question is whether a law for the immediate sequestration of the State's revenue upon a strong presumption of default, subject to the State's right to apply to the Court to displace the sequestration, can be considered as an exercise of the power as we have construed it. We have come to the conclusion that this question should be answered in the affirmative. Strong as the measure is, it may be fairly regarded in the conditions which at present prevail, and which we are entitled judicially to

*A proclamation under sec. 7 was these reasons were actually published. in fact issued on 7th April after the See Commonwealth Government Gazette Court announced its decision and before 1932, p. 509.

H.C. or A. notice, as reasonably necessary to ensure payment of a liability 1932.

and when judicially established. Sovrn Minor criticisms may be made of various provisions of the Act ALES

eee. parts of secs. 5 and 6 and secs. 7-13, and, having regard to see. 1b:

our of the Acts Interpretation Act 1901-1930, it is unnecessary to deal a, with them. The writ in this action attacked the validity of the Dixon 3. Financial Agreements (Commonwealth Liability) Act 1932, but very little attention was bestowed upon it during the argument. If it purports to impose any liability upon the States which is not impos by the Financial Agreements, it is clear that that liability can o1 be imposed under sec. 4 (4), which requires a suit in this Court, a in that suit the State can raise the validity of the Act. In the vi which we have taken of the Financial Agreements Enforcement 1932 the Commonwealth Liability Act plays no part. In th circumstances and having regard to the very inadequate treatm it received at the hands of the plaintiff in the discussion before us we think we ought not to decide its validity. The only relief can give would be a declaration of right, and this is in our disereti

that the whole of the Financial Agreements (Commonwealth Liab Act 1932 and the whole of the Financial Agreements Enforce Act 1932 are ultra vires the Parliament of the Commonwealth, a are invalid, and ancillary relief. In December 1927 the Com wealth and the States of Australia made an Agreement which is scheduled to the Financial Agreement Act No. 5 of 1928. B the Agreement the Commonwealth took over, on Ist July 19 public debts of the States amounting to over six hund million pounds, and assumed as between the Commonwealth a the States the liabilities of the States to the bondholders. It was also agreed that the Commonwealth should pay to bondholder from time to time, interest payable on the public debts of the States taken over by the Commonwealth. The Commonwealth itself wa during a period of fifty-eight years, to provide certain amounts

towards the interest payable in respect of the public debts of the States. On the other hand, each State agreed during the same period of fifty-eight years to pay to the Commonwealth the excess over the amounts which the Commonwealth agreed to provide necessary to make up as they fall due the interest charges falling due in that year on the public debt of the State taken over by the Commonwealth. The method by which these payments should be made was to be arranged from time to time between the Common- wealth and the States. A sinking fund was also established by the Agreement at the rate of 7s. 6d. for each £100 of the debts of the States. The Commonwealth agreed to contribute 2s. 6d. for each £100, and the States, each in respect of its debt, 5s. for each £100. Each State also agreed with the Commonwealth that it would, by the faithful performance of its obligation under the Agreement, indemnify the Commonwealth against all liabilities whatsoever, in respect of the public debt of that State taken over by the Common- h, other than the liabilities of the Commonwealth under the "Agreement, to pay interest and make sinking fund contributions. 'This is but an outline of the provisions of the Agreement material to this case. Under this Agreement the Commonwealth took over debts of the State of New South Wales amounting to more n two hundred million pounds. _ An agreement of this kind adjusting the financial relation of the Commonwealth and the States required not only ratification by the Parliaments of the Commonwealth and the States but also an alteration of the Constitution of Australia. The Constitution was is: the manner required by sec. 128 of that Act, and the altera- appears in the Act styled the Constitution Alteration (State s) 1928 (No. 1 of 1929). It provides (sec. 105a) : - (1) "The wealth may make agreements with the States with respect the public debts of the States, including - (a) the taking over of such debts by the Commonwealth; (6) the management of such debts; (c) the payment of interest and the provision and manage- 'ment of sinking funds in respect of such debts ; (d) the consolidation, renewal, conversion, and redemption of such debts ; (e) the indemni- fication of the Commonwealth by the States in respect of debts taken over by the Commonwealth ; (f) the borrowing of money by

the States. (2) The Parliament may make laws for vali such agreement made before the commencement of this se (3) The Parliament may make laws for the carrying out by parties thereto of any such agreement. (4) Any such agreen may be varied or rescinded by the parties thereto. (5) Every sue agreement and any such variation thereof shall be binding up the Commonwealth and the States parties thereto notwithstan anything contained in this Constitution or the Constitution of several States or in any law of the Parliament of the Commonwealt or of any State."

The Parliament of the Commonwealth approved of the Agr already mentioned before the alteration of the Constitution (No of 1928), and validated it after the alteration of the Constitutia was made (No. 4 of 1929). The Parliament of each State al ratified the Agreement : New South Wales (No. 14 of 1928), Victor (No. 3554 of 1927), Queensland (18 Geo. V. No. 22), South Australi (No. 1837 of 1927), West Australia (No. 1 of 1928), Tasmania (N 97 of 1927).

The object of all this legislation is apparent. It was to estal beyond question the validity of the Financial Agreement and future agreements of the same kind, to render the rights and duti created or imposed thereby unalterable without the mutual agreement of all the parties thereto. The State of New South Wales di provide certain interest payments upon its public debts in accordant with the Financial Agreement, and this led to the passing of th two Acts attacked in this action. It has been strenuously ti that these Acts are an interference with the sovereign rights of States and with the judicial power of the Commonwealth its Courts. But, as has been pointed out more than once in thi Court, the States are not sovereign powers. (See The Commonweal v. New South Wales (1).) By the Constitution a restriction is p upon their supposed sovereign rights by the grant to the Feder power of the right and power to legislate with respect to vari matters. Again, one of the privileges or rights of a sovereign pow is its immunity from action without its own consent. Yet by th

Constitution this right or privilege was surrendered, and by sec. 75 jurisdiction i is conferred on this Court in all matters in which the Commonwealth or a person suing or being sued on behalf of the Commonwealth is a party, between States, or between a State and a resident of another State (The Commonwealth v. New South Wales (1)). Hence the rights and duties of the Commonwealth and the States, at least so far as they can be referred to some legal

• standard, are justiciable and may be determined by judgment (Lhe Commonwealth v. New South Wales ; South Australia v. Victoria (2)). The exercise of the judicial power, however, " essentially wolves the right to enforce the results of its exertion." So much is recognized both under our own Constitution and in the United States of America (Virginia v. West Virginia (3)). The nforcement of judgments against States is not as a rule a question 'of any importance, for usually provision is "readily and promptly " e to satisfy any such obligation. But if a State refuses or s to discharge such an obligation, the question assumes grave ions. A Court does not enforce its judgments. The Executive er of the Commonwealth, which is vested in the King under c. 61 of the Constitution, necessarily acts in aid of the judicial wer in this respect. In the case of Australian Railways Union r. Victorian Railways Commissioners (4) I ventured the opinion nothing in the Constitution, before its alteration by sec. 105a, ited the conclusion that the Commonwealth could, under its ive, judicial, or executive functions, interfere with, or impair e constitutional power of the States to appropriate their consoli- dated revenue funds as by any Act of the State Legislature should be provided in that behalf. I see no reason for departing from this , not because the obligations on the part of a Government to money under a judgment are contingent upon provision being de by Parliament for the discharge of such obligations, but because provisions of sec. 51 do not explicitly so provide, and no such hority is inherent in or incidental to the executive or judicial power. _ In the United States of America much greater authority is claimed both for the legislative power and the judicial power (Virginia Case). One, however, may well say with Chief Justice Marshall

BS (ion) }) 32 CLLR. 200. (3) (1918) 246 U.S. 565. 1911) 12 GL.R. 667, (4) (1930) 44 C.L.R., at p. 389.

the Virginia Case (1) savour too much of the exercise of the pol power to be within the proper province of the judicial depa (Cherokee Nation v. State of Georgia (2) ). The judicial rem are still, I believe, undefined in the United States of America, fo West Virginia submitted in the end to the judgments of the Suprem Court of the United States. The argument on the part of the Stat that the judicial power of the Commonwealth can only be exerted by the Courts mentioned in sec. 71 of the Constitution is, of course quite true. But though the rights and obligations of parties only be authoritatively determined and adjudicated upon by th judicial power, it does not follow that the remedies for the non observance of those rights and obligations must be sought through the judicial power and in judicial process. A party may have extr judicial, as well as judicial, remedies. That depends in some cases upon the agreement of the parties and in others upon the provision: made by a competent legislative authority.

The interpretation of the new and extended powers given by sec. 105 of the Constitution must be now considered. The objec for which the power is granted must be kept in view. Notwithstand- ing anything contained in the Constitution or the Constitutions of the States the Financial Agreement is binding on the Commonwealth and the States. It is part of the organic law of the Commonwealth It can only be varied or rescinded by the parties thereto. Nothing in the Constitution or in the Constitutions of the States can affect i or prevent its operation. It creates rights and duties as betwei the Commonwealth and the States upon and in respect of which th judicial power of the Commonwealth can be exerted. "Th Parliament may make laws for the carrying out by the partie thereto of any such agreement." The words are not technical : carry out an agreement is but to give effect to it, to perform a execute it, to bring it to a conclusion. Moreover, it is a legislatit power operating with respect to agreements that are made obligato by the Constitution upon both the Commonwealth and the State Doubtless, the words authorize Parliament to make laws enabling and assisting the parties to perform their agreement. But in thei

context the words directly point to legislation for the performance |! ©. oF A.

and execution of the agreement ; legislation that will bring about

or tend to bring about, or "is really calculated to effect" that N

object (M*Culloch v. State of Maryland (1) ), or, in short, the enforcement by appropriate legislation of the agreement. The latter phrase is suggested by two or three amendments in the Constitution of the United States of America : " Congress shall have power to enforce by appropriate legislation . . . this Article." ' Whatever legis- lationis . . . adapted to carry out the objects" of the amendments held to be within the power of Congress (Ex parte Virginia

)). Much stress was laid upon the words " for the carrying out by the parties thereto of any such agreement." Certainly they limit the scope of the power and confine it to laws that will bring

• about, or tend to bring about, performance or execution of the agreement by the parties. But they do not limit the power to laws that simply enable or assist the parties to perform their own _ agreement, Further, it was said to be unlikely that a power of ~ enforcement was given to the Commonwealth and none to the States. The parties did not contemplate default but if default took place ; Commonwealth seems the natural custodian of the power to the Agreement and to provide remedies for non-performance, on its own part or on the part of the States. It cannot the construction of the clause that the States cannot dictate the Commonwealth what remedies it should grant in case it makes "default in performance of the Agreement. The extent of the power such as I have stated, the Parliament may exert it against States because they are parties to the Agreement, and it may

, the performance of the Agreement, whether those means be or extra-judicial.

_ All that remains for consideration is whether the Acts attacked this case fall within the description of a law for carrying out by the parties the Financial Agreement. Part II. of the Financial Agreements Enforcement Act deals with enforcement against State revenue. By the interpretation clause the State includes any public authority, incorporated or unincorporated, constituted under the

~ (1) (1819) 4 Wheat. 316, at p. 423, (2) (1879) 100 U.S. 339, at pp. 345, 346.

all such means as are adapted to carry out the object of the -

laws of a State which has power to levy rates, taxes, or ch collect revenue for a public purpose, and is declared by ¢ Governor-General by proclamation to be a public authority fort purposes of this Act, but does not include a municipal coun shire council, or local governing authority. Again, specified revent means such revenue or such class of revenue of a State specified described in a resolution passed by each House of Parliament j pursuance of this Act. The States are organized in the legislative, executive, and judicial departments, but the executi departments have, invariably, not only a central administration but also various organizations and agencies constituted for t purposes of government. They are creatures of the State an exercise part of its functions. The interpretation clause adopts thi well known constitutional development and declares that they s be included within the term "' The State." It does not extend tl obligations of the States under the Financial Agreements to o bodies but simply includes the State and its organizations, age

and creatures within the provisions of the Enforcement Act. is nothing, to my mind, unlawful in this provision. Follow the interpretation clause comes Part II. of the Act, " Enforceme against State Revenue." By sec. 5 a summary method is provid of obtaining a binding and authoritative decision of the amour

power and the jurisdiction is vested in this Court. That provisio is clearly warranted by the provisions of sec. 76 of the Constitutio The requirement of a certificate from the Auditor-General of th amount due is made a condition of the exercise of this summat jurisdiction, and by sec. 22 is made prima facie evidence that # amount certified is due. The Constitution itself (sec. 76) wa the former provision and decisions of this Court the latter (Williamst v. Ah On (1) ). A declaration of the amount due is enforceable a judgment of the Court and in addition operates as a charge all the revenues of the State. The right and jurisdiction of the C to pronounce such a judgment being established, the Parliame has clearly the right under sec. 105a to use appropriate means

making that judgment effective against the State and its govern- mental agencies. A charge has long been known and treated as an appropriate remedy in aid of judgments (compare Judgments Act 1838, 1 & 2 Vict. c. 110, sec. 13). A new and novel method of enforcing the declaration or judgment of the Court is also provided in sec. 5 (7) of the Act. It cannot be described as judicial process, but the Parliament is not confined to judicial process in the enforcement of judgments. It may, if it thinks fit, use extra- 'judicial means, and to it is assigned by sec. 105a of the Constitution a discretion "with respect to the means by which the powers" conferred by that section " are to be carried into execution." Upon the declaration of the Court that any amount is due by the State to the Commonwealth each House of Parliament may resolve that certain provisions of the Act shall apply in relation to the State specified in the resolution, and thereupon the revenue of the State specified in the resolution and included in a proclamation shall as from a date fixed by proclamation, and during the currency of the "proclamation, be payable to the Treasurer of the Commonwealth or to persons authorized by him. The means chosen are relevant to, and adapted to the enforcement of the judgment against the State, _and beyond this the matter is one for the discretion of Parliament. If _ the provision had been in the simple form adopted in New South Wales (Claims Against The Government and Crown Suits Act 1912, No. 27, 'sec. 11 (2)) - *' In the event of such payment not being made within sixty days after demand, execution may be had for the amount, and

_ levied upon any property vested in the Government "" - the relevance and propriety of the law as a means of enforcing the judgment would I suppose, have been denied, assuming, of course, that sec. warrants laws enforcing the Financial Agreement. But it

the extra-judicial character of the provisions in sec. 5 (7) and

. 7 that was, to some extent, relied upon for the purpose of invalidating them. The fallacy, with respect, resides in the view that Parliament cannot adopt extra-judicial methods as well as judicial process for the enforcement of the Financial Agreement and judgments establishing rights and duties thereunder. Some 'Teliance was placed upon the authority to receive the State revenue "during the currency of the proclamation," but the only revenue

T now come to the attack upon sec. 6 of the Act. In case 9 urgency and in order to protect the interests of the Commonwealth until the question of the liability of the State has been determined

that the amount stated in the resolution, or part thereof, is du and payable by the State, or the State may apply at any time a

a smaller amount, is payable. The procedure cannot, I think, treated as in aid of judicial proceedings or as preserving for purposes of effective judicial process the revenue of the State.

liberty to help himself without any recourse to judicial proceedin for a declaration of his rights. If the Parliament has, as I think

then it can, in my opinion, grant to any of the parties to Agreement the mode of self-help or self-redress contained in sec. 6 of the Act. Thus the Act might more simply have provided in case of default on the part of the States in performance 0 obligations under the Agreement, the Commonwealth may collect and apply the revenues of the States in and towards satisfyin such obligations. This is no invasion of the judicial power, for it

does not begin until some tribunal which has power to give a binding and authoritative decision is called upon to take action (Huddart Parker & Co. v. Moorehead (1); Shell Co. of Australia v. Federal Commissioner of Taxation (2) ). Conditioning the right of self-help or self-redress upon the certificate of the Auditor-General and resolutions of the Houses of Parliament may prevent error and too hasty action, but it does not alter the character of the remedy given. 'The duty of the Commonwealth and the right of the States to apply to the High Court for a declaration of the amount due are for the purpose of determining whether any obligation on the part of the _ State exists and whether the remedy of self-redress given by sec. 6 has been rightly exercised. In my opinion, therefore, sec. 6 of the Act is valid and within the competence of Parliament. The provisions of secs. 8, 9, 10, 11 and 12 are all ancillary to secs. 5 and 6, incident to the expressed power in sec. 105a of the Constitution and necessary _ to its execution. The Commonwealth may sue for moneys which it

is authorized to collect ; protection is given to persons who pay in

• accordance with the Act ; sanctions are imposed for the contraven-

_ tions of the Act of any of the provisions contained in those Parts. _ Lastly sec. 13 is but an extension of the provisions of sees. 5 and 6. Parts III. and IV. of the Act are included within the claim for a

'declaration that the Financial Agreements Enforcement Act is invalid. e But, with the exception of the provision contained in sec. 15, little argument was addressed to the Court with regard to them. _ It is better to reserve those provisions fot further consideration. _ It is better also that sec. 15 should have further consideration, and 'its operation upon trust and other funds discussed. The Financial Agreements (Commonwealth Liability) Act 1932 was also attacked, but little or no argument was advanced with regard _ to it. It should also be reserved for further consideration though it seems, at first sight, calculated to effect an object of the Financial Agreement, namely, the taking over of the State debts by the Commonwealth and the assumption by the Commonwealth as _ between the Commonwealth and the States of the liabilities of the States to the bondholders.

(1) (1909) 8 C.L.R., 357, (2) (1931) A.C., at p.295; 4 C.L.R., at pp. 542-543,

Evarr J. The State of New South Wales, supported by th States of Victoria and Tasmania, which were granted leave to intervene, challenges the validity of the Commonwealth Acts No. 3 of 1932 and No. 2 of 1932 and asks for appropriate declarations,

The Act No. 3 of 1932 is called the Financial Agreements Enforce. ment Act. It describes itself as "' An Act to provide for the carrying

out of the Financial Agreements between the Commonwealth and the States by the parties thereto, and for other purposes." Whether this is a true description of its contents will presently appear.

The general purpose and effect of the Act is to prescribe two. methods for setting in motion machinery in order to secure the receipt by the Commonwealth of moneys sufficient to meet: all liquidated amounts owing " by a State to the Commonwealth under or by virtue of the Financial Agreements." r

The first method is that prescribed by sec. 5. The Commonwealth Treasurer may at any time request the Commonwealth Audito General to furnish him with a certificate in writing stating the amount of any debt owing by any State to the Commonwealth under the Financial Agreements. The Auditor-General duly furnishes the certificate and the Treasurer is bound to publish it in the Commonwealth Gazette. After such publication the Common- ; wealth Attorney-General may apply to the Full Court of the High Court for a "declaration" that the whole or part of the sum of money mentioned in the certificate is due and payable to the Commonwealth by the State in question. The declaration is to be made in pursuance of motion and upon three days' notice to the State. The "declaration," when made, is to be 'a judgment of the High Court in favour of the Commonwealth against the State." It is not only enforceable as a judgment but it is to operate "as a charge upon all the revenues of the State."

After such a " declaration " secs. 7 to 13 of the Act may be brought into play, provided each House of the Commonwealth Parliament resolves to that effect. It is significant that secs. 7 to 13 of the Act may operate although other litigation is still pending in this Court as to the liability of the States to the Commonwealth under the Financial Agreements (sec. 5 (8) ).

The jurisdiction of the High Court to make a " declaration " under sec. 5 arises only after the Auditor-General has given the certificate to the Treasurer and the Treasurer has published it in the Gazette. Further, the proceedings in the High Court are between two parties only, the Commonwealth applicant and a State respondent. To all the Financial Agreements there are seven parties, consisting of the six States in addition to the Commonwealth itself.

Before referring to the sanctions and directions imposed by secs. 7 to 13, it is convenient to describe the second method by which they can be brought into operation.

See. 6 enables the Houses of the Commonwealth Parliament to bring sees. 7 to 13 into force and effect against a State even before the High Court has made any " declaration " affirming any liability to the Commonwealth. Resolutions of the two Houses may be _ moved by or on behalf of a Minister approving and adopting the _ Anditor-General's certificate and stating that by reason of urgency / secs. 7 to 13 should be applied immediately to the specified revenues of the State in alleged default "in order to protect the interests of the Commonwealth until the question of the liability of the State has been determined by the High Court." " Upon such a resolution being carried, secs. 7 to 13 take effect although there are pending in the High Court legal proceedings ~ which will determine the question of the State's alleged liability to the Commonwealth. It is provided that, as soon as practicable, . and within two months after the carrying of the resolution, the

• Commonwealth Attorney-General must apply to the High Court for _ a declaration that the amount stated in the resolution or any part thereof is owing by the State to the Commonwealth. Further, the 'State may also, at any time after the passing of such a resolution, apply to the High Court for a declaration that no amount or a smaller amount than that stated in the resolution is owing by it to the _ Commonwealth. But secs. 7 to 13 continue to operate while the High Court is actually dealing with those applications for a "declaration," and until the moment when the Court declares that 'no part of the amount stated in the resolution is due and payable and unpaid by the State in question to the Commonwealth.

Secs. 7 to 13 may thus be invoked by way either of sec. 5 or sec. 6. To say that these sections provide a startling method of making up the actual or alleged debt of the State to the Common- wealth is an understatement. The resolution of the Houses which must precede the application of the sections specifies revenues or of revenues of the State. A Commonwealth proclamati then issues making all specified revenues of the States payable to the Treasurer of the Commonwealth or such persons as he authorizes.

The individual citizen must pay to the Commonwealth any money which he owes to the State and which would have formed part of the specified revenues of the State if received by it. He must pay not only debts existing at the date of the proclamation but those coming into existence during its currency. If he pays the Commonwealt his liability to the State is discharged. If he does not pay , Commonwealth, the moneys may be recovered at its suit. If he pays the State he commits an offence, heavy penalties are imp upon him, and he is still liable to pay the Commonwealth. Any State Ministers of the Crown or State officers who receive or permit the receipt of such debts are guilty of an offence. 4 The main difference between the methods provided by sees. 5 and 6 for such " execution" against State revenues is that, in the former case, a "declaration"? of the High Court must prece execution, while in the case of sec. 6 execution may be levied before any declaration is made by the Court. This difference is impor because, in the case of sec. 5, the " declaration" of the High Cou is an assurance (subject to appeal) that money is due and payable and unpaid. In the case of sec. 6, however, there is no such assurance. It has been contended that the Auditor-General's function n making a certificate is the comparatively simple one of ascertaii whether money is due and unpaid, and that he is not entitled have regard to any set-off payable by the Commonwealth to tl State under the Financial Agreements or otherwise. The most favourable way to the Commonwealth of regarding sec. 6 is that the State's revenues may only be taken when there isa real probabili that money is owing by it to the Commonwealth, and that consequences which ensue upon an actual " declaration" by

High Court that the State is in default in its payments, are merely anticipated, so as to safeguard the interests of the Commonwealth during the relatively short period in which a declaration one way or the other must be made. The main question which is discussed in the present judgment is the validity of sec. 5, so far as it presents features common to itself and sec. 6. But sec. 6, regarded separately, can hardly be defended, unless the constitutional power of the Commonwealth Parliament authorizes it to give the Commonwealth the right of levying "execution" against the revenues of a State, not only at : a time when nothing may be owing in fact by the State to the _ Commonwealth, but without any control of the issue of such "execution" being given to the judicial organs. In respect of this taking of State revenues in advance of the High Court's decision, the Commonwealth, through its various non-judicial organs, combines the roles of plaintiff, Judge, and executioner. The High Court is deliberately prevented from staying this extra-judicial process (sec. 6 (7) ), which, as has been indicated, may lawfully continue until the point of time when the Court declares that no part of the amount stated in the resolution is owing by the State to the Commonwealth.

In the meantime, however, irreparable damage may be sustained by the State, and the exercise of its legislative and executive capacities

'effect. No benefit was ever derived from it in the Banker's Case; and Parlia- ment was afterwards obliged to provide a particular fund towards the payment of those debts, Whether, however, this alteration in the mode of distributing

'the supplies had made any difference in the law upon this subject, it was unnecessary to determine ; at any rate, if there were a recovery against the Crown, application must be made to Parliament, and it would come under the head of supplies for the year " (3).

Nearly a century and a half has passed since the judgment referred to. In that period popular Houses have assumed full responsibility

. the assessment, levying, collection, appropriation and manage-

'ment of public charges upon the people. So far as England is oncerned the Parliament Act 1911 has defined the relative functions

Lords and Commons in respect to, inter alia - "the imposition, repeal, remission, alteration, or regulation of taxation ; the imposition for the payment of debt or other financial purposes of charges on 'the consolidated fund, or on money provided by Parliament, or the variation 'or repeal of any such changes" (1 & 2 Geo. V. ¢. 13, see. 1 (2) ).

"Tt follows, accordingly," says May, "that the Lords may not amend the provisions in Bills which they receive from the Commons . . . 80 astoalter, whether by increase or reduction, the amount of a rate or charge, its duration, mode of assessment, levy, collection, appropriation or management ; persons who pay, receive, manage, or control it; or the limits within which it is leviable" (May, Parliamentary Practice, 11th ed., p. 575).

So far as the Dominions are concerned, the same broad principle is almost universally applied, at any rate since the Privy Council, the year 1886, answered questions relating to the respective netions of the Legislative Council and the Legislative Assembly of in regard to Money Bills. The New South Wales e has been embodied in a valuable memorandum on the whole

1. (1786) 1 TR. 172, at p. 176; 99 (2) (1690-1699) LL St. Tri, 136, at p. 1036, at p. 1038. 159, (3) (1786) 1'T.R., at pp. 176-177; 99 ELR., at pp. 1038-1039,

22nd, 1929, Hansard, December 6th, 1928, pp. 2602-2604). In a real sense the King's State revenues are impressed in hands of the King's representative and the responsible State Mi

service of the King. It would be a serious intrusion upon constitutional system if, in the absence of authorizing State legisla

taken in execution to satisfy any judgment against the King right of the State. It is not correct to say, without qualification that they are the King's moneys.

might be sufficient to warrant the conclusion that the main provisi of the Financial Agreements Enforcement Act are ultra vires.

would ordinarily be taken before their receipt at the State Treas or by an accounting officer of the State. But the Act treats these moneys as property of and debts accruing to the State. tion of the Commonwealth at a point of time anterior to the actual

part of the specified State revenues. What takes place amounts to what Isaacs C.J. described in the Australian Railw Union Case as an " invasion" of the revenues of the State.

If the moneys to be taken at the order of the Commonwea Treasurer are not to be regarded as part of the revenues of the Sta the law authorizing their taking must be regarded in part at lea asa Federal law imposing taxation. To take moneys from the peopl is to tax the people. A law does not cease to be a law imposing taxation merely because the amount of money to be taken has alread been determined by State laws and assessments issued thereunder. the result, it is the Commonwealth which takes and taxes, and a the Financial Agreements Enforcement Act makes such taxation

leviable only in the case of and with respect to a State of the Common- wealth which is in default, the law must operate so as to discriminate between States. But this is expressly forbidden by the Constitution (sec. 51 (11.)). On the whole, however, it is simpler to take the heading of Part II. of the Financial Agreements Enforcement Act, "Enforcement against State Revenue," at its word and treat the moneys payable by the State taxpayers to the State as part and pareel of the State's revenues. In order to distinguish the present case from that of the Australian 'Railways Union Case (1), where the liability of a State to pay its employees the wages fixed by binding Commonwealth awards was considered by Isaacs ©.J. and Starke J., itis argued that the obligation of the State to observe the Financial Agreements is unconditional "because it is binding notwithstanding anything contained in the Constitution of the State (sec. 105a (5) ), whereas an award made Commonwealth law is only enforceable against a State subject to sec. 106 of the Commonwealth Constitution, which recognizes continuance in existence of the Constitutions of the States. this distinction is not satisfactory. The power of the Common- ealth Parliament to authorize the issue of the legal command Bs which makes Federal industrial awards binding upon a State, springs ot merely from sec. 51 (xxxv.) of the Constitution itself but from ering clause V. of the Imperial Act to which the Constitution is heduled. By virtue of the covering clause the binding quality of id Commonwealth legislation is assumed to be of the same order the Imperial Act itself. Both bind " notwithstanding anything the laws of any State." Moreover, the financial system which is basis of responsible government in the States can hardly be said o be really "contained " in the State Constitution, regarded as a ritten enactment. The more reasonable conclusion is that the ial Agreements are " binding upon" the States just as valid ederal laws and awards may be binding. The obligation is not conditional but unconditional. Enforcement of judgments relating to such obligations is a different question.

• But such question need not be discussed further for the purposes the present case because of the conclusion that sec. 5 is invalid

for reasons quite apart from the important principles expounde by Isaacs C.J. and Starke J. in the Australian Railways Union Oa : (1)).

It will, therefore, be assumed that there is no constitutional objection to sec. 5 merely because the sanctions it embodies a directed at the seizure of moneys which are part of the revenues 0 the State. The validity of the section has still to be tested.

It is elementary that those who affirm the validity of secs. 5 a 6 must be able to point to some legislative power of the Common wealth Parliament, which authorized their enactment. "The burden," said Viscount Haldane L.C. in Attorney-General for Commonwealth of Australia v. Colonial Sugar Refining Co. (2), "res on those who affirm that the capacity to pass these Acts was put within the powers of the Commonwealth Parliament to show that this was done."

For such purposes it is not directly relevant to point to the declaration in sec. 105a (5) that the Financial Agreements shall be "binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State." It may be assumed that this declaration makes the Agreements fully binding upon the States, and binding in such a way as neither they nor the Commonwealth may lawfully abrogate, alter, denounce, or repudiate them under their respective constitutional powers. But the Financial Agree Enforcement Act is the product of the Commonwealth Legislature, which is a Parliament with defined and specific powers. The relevant

question is whether the Commonwealth Constitution has given the Parliament power to enact such a law. Three suggestions have been made. c

1. Sec. 105a (3) gives legislative power to the Commonwealth to " make laws for the carrying out by the parties thereto of any such agreement." It is said that the Act is such a law.
2. It is suggested also that the Act is a law with respect to "matters incidental to the execution of " a power vested by

(1) (1930) 44 C.L.R. 319. (2) (1914) A.C. 237, at p. 255; 17 C.L.R, 644, at p. 653.

Constitution in the Government of the Commonwealth (sec. 51 4- (cxrx,) ).

3. It is also suggested that the Act is a law with respect to Ne "matters incidental to the execution of " a power vested by the Constitution in the Federal Judicature (sec. 51 (xxxrx.) ), or, in the

the Commonwealth or a State in respect of matters within the limits of the judicial power." It is best to deal. with these suggestions in the order stated. The power contained in sec. 105a (3) is to make laws for the 4 carrying out by the parties" of financial agreements of the class deseribed in sec. 105a (1). The power extends to future agreements : more obviously than it does to agreements made before the commence- 'ment of sec. 1054. But it will be assumed that it applies equally to both classes. The natural meaning of the words " carrying out " is giving effect to or putting into operation. The phrase " carrying " has been used frequently by Australian Legislatures when referring to regulations made by the Executive under the authority of an Act of Parliament. These regulations often deal with matters which are necessary or convenient to be prescribed for " carrying 'out or giving effect " to the Act itself. In this context, " carrying " the Act by binding regulations means the making of laws of subordinate character for the purpose of implementing, facilitating providing machinery ancillary to the principal commands of

It is very important to remember that the power given to the mwealth Parliament in sec. 105a (3) was the result of action the part of the Commonwealth Parliament in accordance with arrangement between the Commonwealth and the States as ibed in the first Financial Agreement of 1927. That Agreement that permanent effect could not be given to the proposed ' unless the Constitution of the Commonwealth "is altered so as to confer on the Parliament of the Commonwealth power to make laws for carrying out or giving permanent effect to such _ proposals."" This recital seems to be anticipating the operative part of the Agreement under which the Commonwealth undertakes to submit proposals for altering the Constitution so as to enable

alternative, a law under sec. 78 " conferring rights to proceed against tea

the Agreement itself (sec. 105 (2) ) and for the carrying out the parties of the Agreement (sec. 105a (3) ).

But the contention made on behalf of the Commonwealth is that "carrying out" includes the provision of any and every means calculated to result in the performance by the parties to the Agre ment of all their obligations under it. So construed, the po would admit of few, if any, limitations. It would not only enable the Commonwealth to seize State property and State revenues but to pass special taxation laws for the purpose of extracting funds from a defaulting State. Was it for such purposes that the seemingly innocuous phraseology of sec. 105a (3) was agreed to by all th Parliaments of the States ?. Mr. Ham has argued that the obligati of the Commonwealth to bondholders in respect of the payment of interest on State debts "' taken over " under the Permanent Provisions of the 1927 Agreement, were assumed and must be met by Commonwealth whether the States pay their interest to Commonwealth or not; and he concludes that drastic powers of enforcement against defaulting States must have been in contemplation of the parties who agreed upon sec. 105a (3).

The answer to this argument is that it is very unlikely that the possibility of a State's inability or unwillingness to meet its int payments was thought of at the time the Agreement was ent into. If the enforcement as against the States of their contra obligations is the idea behind sec. 105a (3) the language is singularly ill-adapted to hint at, much less express, such a thought. word "enforcement '' would have been the obvious word to Further, the assumption that the Commonwealth has agreed unconditionally to make interest payments on the specified Stat debts should not be made. On the contrary there is much to be said for the view that clause 2 of the Permanent Provisions (Pa IIL.) of the 1927 Agreement has been deliberately devised in 01 to make the Commonwealth's duty to pay interest to bondhol upon the debts therein described, strictly conditional upon each State fulfilling, from time to time, its duty to pay the interes money to the Commonwealth.

~ It was admitted by counsel for the Commonwealth that it was no' solely to meet cases of default on the part of the States that sec. 105a (3) was included, and that it was also intended that the N Commonwealth should be vested with legislative power to pass laws providing machinery necessary or desirable in the working out of many matters generally described in existing and future financial _ agreements. But it is far more likely that this was the sole intention of see, 1054 (3). The sounder inference is that the parties intended that the natural meaning of " carrying out" in its context should be adhered to, and that default by the parties, not having been feared, was not provided against. It was anticipated that much "might have to be done by the parties in the course of any financial 'agreement being performed. For instance, an agreement providing for the management of debts would require that some controlling authority should be empowered to regulate the method and lay down the scheme of management. Again, the Commonwealth might "be bound to raise money from time to time in pursuance of decisions of the Loan Council. Matters of such a character might require 'detailed regulation by the Commonwealth Parliament under sec. 105a (3). Moreover, the power extends to future agreements which ght require Commonwealth legislation for them to operate at . Such legislation could be passed under sec. 105a (3). At this point it is convenient to notice two arguments which were sed to the Court. It was said for the Commonwealth that

itution, and that, therefore, laws for enforcing the Financial ments should be regarded as contained within the scope of sub-section. The first step in this argument is not sound. Further reference will be made later to the meaning of sec. 51 (XXXIX.), laid down by the Privy Council. For present purposes, it can be

that placitum xxxrx. cannot justify the passage of a law which mild bind both the Commonwealth and the six States in relation

characterize the first Financial Agreement. Sec. 51 (XXXIx.) only to existing powers vested by the Constitution in specified

instrumentalities of the Commonwealth, but all financial agreement although binding upon the Commonwealth, are binding as agreement: and do not confer any special constitutional " powers" upon thy Government of the Commonwealth. The State Governments a bound equally. In any event, the Commonwealth Parliament cou not, under sec. 51 (xxx1x.), pass laws which would be binding upon the States in respect of the exercise by them of any of the rights or duties created by the Financial Agreements. Hence there w required some such machinery provision as sec. 105 (3), in order th one set, and not seven diverse sets, of rules and regulations could be promulgated for carrying out all existing and future agreements It was obviously convenient to select the Commonwealth Parliam as the law-making authority for such purpose, and such a sele was made in sec. 105a (3).

financial agreements meant a law " for the performance " of such agreements, because to " carry out " an agreement was to " perform it. And he argued that it necessarily followed that laws providing remedies for breaches of the agreements by any of the parties were laws for their " performance " because, after the remedies had been fully exercised, the result would be that the parties had "completed " or "carried out" or " performed " the agreements.

That part of the argument which identifies "carrying out with "performance" is unimpeachable. But there is a distinction between the performance by A of an agreement between A and B, and what occurs when A does not perform is successfully sued by B for breach of agreement, and has execution issued against his property in order to satisfy the judgment debt. It is not true in fact or in law to say that, after the entry of sue satisfaction, A has " performed " or " carried out" his agreement. A has made reparation for his breach of contract, but to say he has "carried out" his contract is exactly the opposite of the truth. So too, it ean never be said of a State of the Commonwe which is unable to carry out and does not carry out its part of financial agreement and against which High Court proceedings

taken and execution levied, that it has " carried out " or " performed" the agreement. 'The answer to Mr. Mitchell's argument is that laws providing remedies in the event of any of the parties not carrying out, ie., committing breaches of the Financial Agreements are not contem- plated by sec. 105a (3) because they are not laws for " the carrying out by the parties "' of the Agreements. _ This interpretation of sec. 105a (3) is greatly supported by the

• consideration that the Commonwealth Parliament's power under see, 105a (3) with reference to financial agreements, is to make laws for their carrying out "by the parties thereto." These words can only be ignored at the price of committing the familiar fallacy a dito secundum quid ad dictum simpliciter. The Commonwealth itself is a necessary party to every financial agreement described in sec. 105a (1). The legislative power of the Commonwealth under sec. 105a (3) extends as much to regulating the carrying out of the Agreements by the Commonwealth itself as by any or all of the States. It is obvious that the sub-section does not look to the _ passing of laws by the Commonwealth Parliament for the purpose of making available to the States, or any of them, remedies : designed to coerce the Commonwealth in the event of any default or non-performance on its part. The power to adopt such coercive

measures against the Commonwealth in cases of breaches by it of any of the terms of the Financial Agreements, is inconsistent with _ any real exercise of such a power by the Commonwealth Parliament itself. This indicates that in sec. 105a (3) the parties were considering matters to be provided for in the course of performing the Agreement, not remedies and sanctions to be adopted in cases of non-performance, either by the Commonwealth itself or by any of the other parties.

_ Even if the provision of sanctions or additional sanctions to meet _ eases of non-performance, is to be treated as included in sec. 105a (3), _ the present legislation cannot be truly described as a law providing sanctions in the event of non-performance "by the parties" of _ their obligations under the Agreements. The legislation is designed to effect a different end. It is to be in force for two years only, a _ very small portion of the full duration of the Permanent Provisions _ of the main Financial Agreement. No sanctions or remedies of any

character are made available to the States. The law is not " properly framed law " within sec. 105 a (3), but an attempt to sad the States with a more rigid code in relation to the performance their contractual duties than that which remains applicable to th Commonwealth itself. (Cf. In re Insurance Act of Canada (1).)

Moreover, even if the power in sec. 105a (3) extends to enforcement, the enforcement must refer to enforcement by the judicial process of the High Court, which, at the time of the making of the first Financial Agreement and of the constitutional change later effected by sec. 105a itself, was invested with power to hear and determine all controversies between the Commonwealth and the States. That jurisdiction is given by the Constitution to the High Court of Australia by direct grant under sec. 75 (11.) of the Constitution (Lhe Commonwealth v. New South Wales (2) ). The jurisdiction is not dependent upon Federal legislation nor can the Federal Parliament

This aspect of the case is of importance. The enforcement of a contract by executing judgments declaring its breach pertains to. the judicial power. In Waterside Workers' Federation of Australia v. J. W. Alexander Ltd. (3) Isaacs and Rich JJ. said : -

"The arbitral function is ancillary to the legislative function, and provides the factum upon which the law operates to create the right or duty. The judicial function is an entirely separate branch, and first ascertains whether | the alleged right or duty exists in law, and, if it binds it, then proceeds if neces- sary to enforce the law. Not only are they different powers, but they spring from different sources in the Constitution. The arbitral power arises under sec. 51 (xxxv.); the judicial power under sec. 71."

"And when the award is made and the right established, the law presumes the parties will obey it. Enforcement by a Court is an entirely separate matter. It arises on breach or threatened breach. But that is the case with every right. A right of property or a contractual right may exist, and, i violated, the law provides for its enforcement. But breach is not presumed. It follows that enforcement is in its nature an entirely separate process from the creation of the right."

In the same case Barton J. spoke of judicial power " in the spheres of the reception, institution, determination of controversies, and the enforcement of the determination" (5). Previously Barton J.

(1) (1932) A.C. 41, at p. 52. (3) (1918) 25 C.L.R. 434, at pp. 464-465. (2) (1923) 32 G.L.R. 200. (4) (1918) 25 C.L.R., at p. 465. (5) (1918) 25 C.LR., at p. 454,

proved of the description of judicial power by Mr. Justice Miller 'of the Supreme Court of the United States of America as " the of a Court to decide and pronounce a judgment and carry it effect between persons and parties who bring a case before it decision" (1). And in Federal Commissioner of Tavation v. Munro (2) Isaacs J. said "the concept of judicial power includes forcement."

emedies so as to enforce the judgments of the High Court in cases of breaches of the many terms of the Financial Agreements, it is

lly and truly a provision for the " carrying out " of the Agreement y the parties thereto." The attempt to confer upon the High jurisdiction to make a "declaration" of default by some es only to the Agreement, with sanctions applicable to them , i8 quite inconsistent with the words of sec. 1054 (3). The ement may be varied or rescinded "by the parties thereto " sec. 105 (4) ), i.e., all the parties thereto. The same interpretation be given to sec. 105a (3).

'he main feature of sec. 6 of the Financial Agreements Enforcement is that the new form of "execution "' may be levied by the nonwealth against a State before the High Court makes any ation" affirming a liability of the State to the Common- But the operation of sec. 5 is such that this Court, intended the Constitution to be the only authority capable of determining sies and superintending remedies in all disputes between

| subordinate and almost impotent role in its jurisdiction over relating to the Financial Agreements. There may be an already pending in this Court for the purposes of deciding or more of such disputes. Notwithstanding this, revenues of tate may be seized at the will of the Houses of the Commonwealth ment although the Commonwealth is, at the time of the High 's declaration, in the position of having itself broken its obliga- to the defaulting State. The only issue which the Court can

(1) (1918) 25 C.LR., at p. 451. (2) (1926) 38 C.L.R. 153, at p. 176.

debt admittedly owing by the State to the Commonwealth. in the ordinary exercise of this Court's jurisdiction under sec. (m.) such a defence would successfully confess and avoid Commonwealth's claim. The right of the Court to allow such

allow it, if it obeyed the legislation now under review. All that High Court is allowed to do is to make a " declaration " in relatic to unpaid debts of the State without being able, at the same time, t render any judgment in relation to cross-claims and cross-deman of the State against the Commonwealth. :

It can hardly be denied that such legislation is a serious impair of the constitutional jurisdiction of this Court under sec. 75 Under that section the State, as well as the Commonwealth, is enti

Financial Agreements. The Court has complete control of th judicial settlement of all such controversies. In truth, one mo

under an Agreement which gives rights to seven parties, ant this is done under conditions which effectually prevent the Court from rendering complete justice when any State and Commonwealth are;in dispute as to their rights under the Fina Agreements. Yet every notion of justice requires that the shall see to it that to each contending party is assigned his due. - There is a real inconsistency between the method of appro: the High Court prescribed by the Constitution and by the Finan

under sec. 5 or sec. 6 except upon the occurrence of the preced events described in each section. But by virtue of sec. 75 (10 the Constitution the Court has continuous authority to adjudi in actions commenced either by the Commonwealth or by a s

for the purpose of establishing the rights and liabilities of the parties the various Financial Agreements. Referring to the High is power and duty to decide " all matters'? between Common- vealth and State under sec. 75 (111.), Knox C.J., in The Commonwealth y. New South Wales (1), said :- -

"This power is conferred by the Constitution itself on this Court to take cognizance of this matter. Any legislation by Parliament directed to con-

ferring this power would, therefore, be as superfluous as legislation by Parlia- 'ment to restrict the limits of the jurisdiction would be ineffective."

Further reference will be made to this aspect of the case in consider- whether the Financial Agreements Enforcement Act is a law der sec. 51 (Xxx1X.) in relation to the powers of the High Court. it is reasonably clear that secs. 5 and 6 are not authorized by ec. 105A (3) of the Constitution.

_ Now it was sec. 105a (3) to which Parliament was addressing its ittention and which it was intending to exercise when the Financial ents Enforcement Act was passed. This is clearly shown by e recitals. And the question at once arises whether Parliament las not sufficiently expressed an intention to limit its legislation to what may be authorized by sec. 105a (3) alone. No previous decision s the case of the present legislation, which is deliberately drafted exercise of the legislative power contained in sub-see. 3. No er of a satisfactory character has been made to the point, but will be assumed in favour of the Commonwealth that the Common-

But the fact that the main power to which the legislation was ted is that contained in sec. 105a (3), isnot without significance. legislation framed to effectuate one purpose, and as an exercise one power, will seldom be fortunate enough to be a * properly " execution of legislative powers which were either deliberately aside or not thought of by those responsible for its framework general scheme.

~The first suggestion is that sees. 5 and 6 may be laws authorized 'see. 51 (xxxrx.) and the question is whether they are, in truth,

existing constitutional power vested in the organs of Governme and the persons described in placitum xxx1x. "These words said Viscount Haldane (sec. 51 (xxx1x.) ) " do not seem to them: do more than cover matters which are incidents in the exercise 0 some actually existing power " (2).

So far as sec. 61 of the Constitution is concerned, it merely deseril in general terms what is called the " executive power of the Comm wealth." Such power, says the section, " extends to the execution and maintenance of this Constitution and of the laws of the Common- wealth." This, said Isaacs J. in The Commonwealth v. Colonia Combing, Spinning and Weaving Co. (3),

"marks the external boundaries of the Commonwealth executive power, *

the definition of that power and its ascertainment in any given instance Later on he adds that the description of the executive power in

sec. 61 "does not determine the existence or non-existence of the necessary power in relation to a given case, any more than marking the territorial domain determines a similar question in relation to State executive action, Having ascertained in a given case that the constitutional domain has not been ti gressed, we may have to go further and find whether on that field in th circumstances the power in fact exerted was lawful" (4).

It follows that sec. 61 has no bearing upon the present question. In considering the legislative power under sec. 51 (XXXIX.)

5; 17 LR. 644. (3) (1922) 31 C.L.R., 421, at p. 43% : 17GLR., (4) (1922) 31 CLR., at p. 440.

'incidental " was quite distinct from "in aid of," " helpful " and

'Tf I may say so, those matters ' incidental to' mean ' necessary * or 'usually going with.' It is a kind of penumbra to the umbra. It

have a particular subject, you are exercising a power in it, and ething incidental to work out that power." Lord Dunedin "Turtle soup is in aid of dinner; but is it incidental to it ?"" extracts are typical of the views repeatedly expressed by the bers of the Privy Council, and the metaphors graphically strate the principle embodied in the actual judgment of Viscount which has already been quoted. 'The only power vested in the Government of the Commonwealth the Constitution which can have any possible relation to the nt legislation, is that contained in see. 105a (1). By it the nwealth Government is entitled to '"'make'' financial ements. That is an existing power. How is the power 'ised? The power to make agreements is exercised by making em. Placitum xxx1x. authorizes the passing of laws incidental the making of such agreements. Such laws might provide for e manner in which the Executive is to enter into such agreements, safeguards to be observed, e.g., giving publicity to the agreements protecting the signatories, being executive officers, from all personal liability in and about the making of the agreements. But it is obvious that secs. 5 and 6 are not laws which relate in ay way whatever to the execution of the power of the Commonwealth rmment to "make" financial agreements. No other power Government as such can be pointed to. itum XxxIx. is again invoked in order to suggest that secs. nd 6 are laws with respect to the execution of a power vested y the Constitution "in the Federal Judicature." The principle of Sugar Case (1) again applies. We must see what relevant power Constitution gives to the Judicature, what is involved in the on of such power, and what matters are truly incidental and ordinate to such execution.

" » & Tet " iq « | ' f r » effective for Incidental," he said, " does not mean convenient

'placitum xxxix. Lord Moulton repeatedly pointed out that 4. ©. or 4.

The contention is that the Constitution (sec. 75 (111) ) gives pow to the High Court to determine all controversies and matters arising between the Commonwealth and a State, that the liability of State to the Commonwealth under the Financial Agreements m;

jurisdiction between the States and the Commonwealth, that judgment should be enforceable against the property and revenue of the parties.

the Bar that sec. 78 of the Constitution may authorize the pre legislation. The decision of this Court in The Commonwealth v. New South Wales (1) definitely rejects such a suggestion. Sec. ' has no relation to laws enabling the bringing of actions in the Court by the State against the Commonwealth or by the Con wealth against a State. For such jurisdiction has already b

provided for in the Constitution itself (sec. 75 (t1.) ). " Obviously," said Isaacs, Rich and Starke JJ., "the matter was one to b dealt with by the Constitution, which created mutual rights and obligation between Commonwealth and States and foresaw the necessity of some tribunal, not the judicial organ of any one State exclusively, to determine or finally determine possible disputes between Commonwealth and States, and between different States, and between States and residents of other States. As to the the Constitution at once enacted sec. 75 as a self-executing provision in t terms mentioned. 'The words 'in all matters' are the widest that can b used to signify the subject matter of the Court's jurisdiction in the spe: cases. 'Matters' read with the context and in relation to 'judicial powe are limited by the inherent sense of matters which a Court of law can pro) determine, that is, by some legal standard " (2).

of legal rights of every kind - all claims referable to a legal sta of right. . . . The word would, without question, include a cla for breach of contract " (3).

They also pointed out that it was not possible to think that see. does not itself enable the complaining party - whether Common- wealth or State - to approach the Court for redress (3).

(1) (1923) 32 C.L.R. 200. (2) (1923) 32 C.L.R., at pp. 211-212. (3) (1923) 32 C.LR., at p. 213. :

tate or a State to sue the Commonwealth in the High Court.

to declare either the Commonwealth or a State liable for torts. That would beat best a very one-sided provision. It would enable the Commonwealth to

render a State liable to the Commonwealth, and to refuse a reciprocal liability. "It would also enable the Commonwealth to make one State liable to another, 'and leave that other irresponsible to the first. In short, there would be no 'certainty of equal and undiscriminating responsibility to obey the law or make reparation, 'The always present duty of the Crown to abide by and obey the law (Eastern Trust Co. v. McKenzie, Mann & Co. (1)) would be one of imperfect obligation except so far as the Commonwealth chose to impose a perfect sanction. But in truth sec. 78 has no such ambit or purpose " (2).

d, later, they added : "Sec. 75 needs no parliamentary enactment to include this case. The jurisdiction conferred by sec. 75 is beyond the power of Parliament to

ition passed under the power contained in sec. 78. But are y laws with respect to incidents in the exercise of this Court's

hat is the power of the High Court, and what matters are truly ital to the execution by it of its powers? If sees. 5 and 6 of » Enforcement Act dealt with matters merely incidental to the ise by the High Court of its jurisdiction under sec. 75 (11.), would naturally expect to find them included in the High Court yocedure Act or the Judiciary Act. The dominating intention of 6, 75 (u1.) is that the High Court shall be clothed with jurisdiction ermine "all"? matters between the Commonwealth and the It is not, as the judgment of Isaacs, Rich and Starke JJ. ites, a one-sided provision, but is based upon the principle of liability between the Commonwealth and the States and of al and undiscriminating responsibility to obey the law or make

n the High Court exercises this jurisdiction, it administers 'equal and undiscriminating " justice to both parties. It is bound 0 give to each its due. Let it be assumed that it is incidental to exercise of this constitutional power that the Court can be

(1) (1915) A.C. 750, at p. 759. (2) (1923) 32 C.LR., at p. 21 ce "aP (028) 32 CLR, 'av 4 Be, meauan

78, in their view, does not enable the Commonwealth to sue 4. ©. oF A-

"Tt was," they said, " suggested that sec. 78 enabled the Federal Parliament New Sora

empowered by the Legislature to make its judgments effective

States or the Commonwealth. The assumption may be t although the observations in the Australian Railways Union Ca (1) strongly suggest that it is not. The assumption does not help the validity of sec. 5 or sec. 6 the present Act. Neither of those sections is a law dealing

(2) shows that the "matters" over which the High Court jurisdiction under sec. 75 (1.) cannot be limited or restricted by the Federal Parliament, but extend to all claims of right by eith State or Commonwealth, and particularly to claims by either tha the other has broken the terms of a binding contract, and is lia to pay damages or meet a debt. Such "matters" include, course, claims by either a State or the Commonwealth that the othe has committed breaches of the Financial Agreements, but include much more. Yet one is prepared to assume, further, tha legislation under placitum xxxrx. may be directed to the makit of laws incidental to the exercise of the High Court's jurisdiet to determine questions arising under the Financial Agreements but under no other agreements. This assumption is no small because the relation between what is dealt with in legislation drafted and the exercise of the constitutional power in " all matters, is scarcely that of a subordinate to a principal thing. For Legislature's restriction of remedies to cases of judgments relatin

Agreements the dominant feature of the legislation, and the exer i of the constitutional power of the High Court which extend uniformly to "all matters" between Commonwealth and Stat tends to become a very minor feature.

Even on this assumption however, it is impossible to regard see

5 and 6, which apply only to "matters" in which the State 1 (1) (1930) 44 C.L.R. 319. (2) (1923) 32 C.L.R. 200.

defendant and the Commonwealth plaintiff and which, for a period ¥- ©: oF A-

_ of two years only, invoke drastic sanctions in the event of the States

"incidents" in the administration by the High Court of equal _ justice between the Commonwealth and the States in litigation between Commonwealth and State for the purpose of enforcing _ Financial Agreements. The true character of secs. 5 and 6 is that . they impose special remedies applicable only in the case of judgments against the States. These remedies are directed against the States whenever they become judgment debtors and enure, not for the benefit of every judgment creditor, but for the benefit of the Com- _ monwealth when it becomes judgment creditor. No one should need to be reminded of the fact that one-sided ition may be within the ambit of a given power to legislate, ch it: exercises the power in partial and fragmentary fashion. may be needed lest another mistake befall. It does not w from the truth - the truism - that there may be partial and nentary exercises of power - that one-sidedness and discrimina- tion in laws are to be considered and weighed only after the laws e determined to be within the ambit of power. Full account must given to all such circumstances when ascertaining whether the laws are within power. _ The truth is that, as the Parliament of the Commonwealth can only pass valid legislation with respect to a limited number of subject utters, the ultimate inquiry in each case of dispute is whether the ent is a law ' with respect to" one or other of the specified matters. If it answers the suggested description, it will valid although it may also be correctly described as a law with respect to a subject matter that is not specified at all, and may also ¢ characterized as one-sided and discriminatory. The first stage

upon the assumption that it is valid. What does it enact? If it 'is one-sided, partial or discriminatory, the enactment may be detected as belonging to one class of laws and not at all to another class. se of their one-sidedness, the relation between disputed enact- ts and enactments which in substantial operation are of the

of laws with respect to a specified subject matter, may be VOL, LXVI, 16

becoming judgment debtors, as being laws with respect to New Sourm

to such a category. And, by reason of the same one-sidedness, th class to which they truly belong may be easily ascertained. Having regard to these considerations, the question remains: sec. 5 a law with respect to " incidents " in the exercise of the High Court's constitutional power and duty to administer justice bet State and Commonwealth in litigation between these parties for enforcement of the Financial Agreements ? Two illustrations will test the matter :- -

1. Can the Legislature of the Commonwealth, acting under sec. 51 (xxx1x.), declare that if a contract, binding both on the Common: wealth and a State and by the terms of which the State is bound to construct a ship for the Defence Department, is declared by the judgment of the High Court to have been broken, such judgment may (if it be in favour of the Commonwealth) be executed by the seizure of any property of the State, but (if it be in favour of the State) be incapable of execution at all ?
2. Can the Legislature of the Commonwealth, acting und sec. 51 (xxxrx.), declare, with respect to an existing contract bindii on A and B, who are residents of different States, that any jud, of the High Court under sec. 75 (1v.) of the Constitution afi a breach of contract by A, shall be enforceable by execution agai A's person and property, but that no execution shall be levied in the event of B's default ? ' Counsel did not attempt to support the validity of enactments an analogous character which were suggested from the Bench di argument. The two examples suggested are harsh and one-sided that is obvious enough. They are also not valid laws in relati to incidents in the exercise of the judicial power of the High Court, because, instead of providing for the effective enforcement of judgment whomsoever it may favour, they deny the enforcement of the contract to one party but accord it to the other. It is not mere incident of the administration of justice between two pa who have made one or more binding contracts, so to act as to the contracts enforceable against one party but not against t other. Such an act is a hindrance to the equal administration justice, whoever does it. It does not delay justice: it denies it.

| A third illustration which on this part of the case bears a close H. ©. or A. 1932.

resemblance to the Financial Agreements Enforcement Act may be

oe 3. Hasthe Commonwealth Parliament power, under sec. 5] (XXXIx.), to enact with respect to a contract which binds A, a resident of New South Wales, and B, a resident of Victoria, that an action to enforce certain clauses of the contract (which clauses impose duties on A alone) may be brought in the High Court, that no cross-action or set-off can be availed of by A and that execution by ca. sa. may follow upon any judgment of the Court which declares that A has

It is reasonably clear that this enactment belongs to a different category from that of laws which merely prescribe incidents in the ; exercise of the original jurisdiction of the High Court of Australia Bs under sec. 75 of the Constitution. The selection, from the total mass

of duties created by the contract, of those which bind one party alone, the disabling of A from defending himself against B's action

_ by cross-claim or cross-demand under the same contract, and the Mitiicttation of execution to cases of an ascertained breach of the earefully selected obligations, all assist to remove the law out of class of those dealing with matters incidental to the exercise by the High Court of its jurisdiction. The exercise by the High

• Court of its jurisdiction, instead of being the main function around _ which the law centres, has become a means to an end. That end is the giving of a special advantage to B and the imposition of special disadvantage upon A. The absence of mutuality and the _ presence of discrimination show the true nature of the law. The object and purpose of the law is to impede the ordered performance by A and B of the contract, and the intervention of the High Court is provided for in order to secure that object and purpose. The
• Commonwealth Parliament has no jurisdiction under sec. 51 (xxx1x.) _ to pass legislation which, under the guise of prescribing incidents in 'the exercise of the judicial power of the Commonwealth, affects, disturbs and overturns the basis of an existing and binding contract. _ Legal remedies are the criterion of legal rights.

It is not reasonably possible to describe secs. 5 and 6 as laws prescribing mere incidents in the exercise of the constitutional

power vested by sec. 75 (11.) in the High Court as part of the Fed Judicature. On the contrary, the enactments are quite foreign t the nature of the power, which can only be exercised impartially it is exercised at all. They are not judgment creditors' remedie: enactments, but laws which are for the benefit of one party to an agreement in its capacity of judgment creditor. 4

Nothing that I have said depends in the slightest degree upon the doctrine that the States are " sovereign bodies " and entitled to exercise "' sovereign " powers and immunities. Three Justices of this Court took occasion in the case already referred to of The Common- wealth v. New South Wales (1) to denounce the appellation " sovereign State'? as applied to the constitutional position of the State of New South Wales (2). '

Neither Mr. Browne nor Mr. C. Gavan Duffy, who argued the case for the States, called in aid any supposed doctrine of "sovereignty." The phrase is most ambiguous. In some aspects, both the States and the Commonwealth are bodies which may lawfully exercise sovereign powers. The Governors of the States are as much the representatives of His Majesty for State purposes as the Governor- General of the Commonwealth is for Commonwealth purposes. subjection of the States to the jurisdiction of the High Court is accompanied by a perfectly " equal and undiscriminating " subjection of the Commonwealth to the same jurisdiction. For all purposes of self-government in Australia, sovereignty is distributed between the Commonwealth and the States. The States have exclusive legislative authority over all matters affecting peace, order and good government _ so far as such matters have not been made the subject of specific grant to the Commonwealth. And the authority of the State covers most things which touch the ordinary life and well being of their citizens - the maintenance of order, the administration of justice, the police system, the education of the people, employment, the reliel of unemployment, poverty, and distress, the general control of liberty. Speaking generally, all these subjects are no lawful concern of the Commonwealth. '

On this part of the case the States succeed, not because they enjoy a special immunity, but because the Financial Agreements Enforcement

(1) (1923) 32 G.L.R. 200, (2) (1923) 32 C.LR., at p. 210.

Act subjects them to an " unequal and discriminating " jurisdiction.

For the purposes of judicial process in this Court, although the States are not sovereign bodies, neither is the Commonwealth. 'See. 75 (111.) of the Constitution takes away from the sovereignty of States and Commonwealth but takes equally, and takes alike. The Financial Agreements Enforcement Act takes unequally. My opinion is that the Act is not a valid law of the Common- wealth under sec. 51 (xxxrx.) in relation to the exercise of the _ High Court's jurisdiction over controversies between Commonwealth

This conclusion is strengthened by the fact that the Financial

• Agreements are governed by the special constitutional declaration
• contained in sec. 105a (5). That sub-section makes it clear that "the Agreements bind the Commonwealth as well as the six States, bind as agreements, and bind as a whole. Legislation which gives
• effective remedies to the Commonwealth, to enable it to enforce the

It, therefore, appears that secs. 5 and 6 are not laws for the carrying out by the parties" of the Financial Agreements, ither are they laws with respect to matters incidental to the se of any power vested in the Commonwealth Government or in the Federal Judicature. Nor are they laws in exercise of the gislative power contained in sec. 78 of the Constitution.

So far as sec. 154 of the Acts Interpretation Act 1901-1930 is erned, it does not operate so as to make valid any part either of sec. 5 or sec. 6. Of sec. 15a the majority of this Court (Rich, Starke and Dixon JJ.) said in Australian Railways Union v. Victorian y Commissioners (1) : -

"We think it cannot mean that when the Court has reached the con- 'clusion, as we have done in this case, that a single and indivisible enactment of the Legislature is invalid, the Court is to turn aside from its judicial duties

and, assuming the role of legislator, proceed to manufacture out of the material 'intended to compose the old enactment an entirely new enactment with a

~ fresh policy and operation." (1) (1930) 44 C.LR,, at p. 386,

And further (1) : - er "The truth is that sec. 154 cannot apply to divert legislation from one purpose to another."

"But, adopting the metaphor which was employed to desoribe the effect of the provision in the Navigation Act, it enables the Court to uphold provisions, however interwoven, but it cannot separate the woof from the warp and manufacture a new web." rg

Sees. 5 and 6 of the Financial Agreements Enforcement Act are each " single and indivisible enactments," and it is not possible to separate what is bad in them from one or two things which, in them: selves, are innocuous, but which are essential parts of the struc . and scheme which the Legislature has seen fit to adopt.

The conclusions of this opinion may be stated as follows : -

1. The various Financial Agreements between the Commonwealt and the six States confer rights and impose duties upon all the sev parties thereto, and are binding upon each of the seven parties wit precisely the same force and effect (sec. 105a (5) ).

2. But the Financial Agreements Enforcement Act 1932 purport to confer upon one of the parties (the Commonwealth) the right, as against the States, of exercising certain remedies in the event of actual breach (sec. 5) or supposed breach (sec. 6) of portion of the Agreement. The Act confers no remedies whatever upon any or all of the States in the event of the Commonwealth failing to perform its duties to any or all of the States.

3. Sec. 6 of the Act, if valid, permits revenues of a State to be seized and the exercise of its legislative and executive capaci ie paralyzed, in advance of any judicial decision that a State is in default and the High Court is deliberately prevented from staying thi extra-judicial process, which may continue until the Court de that no part of the amount stated in the resolution of the House is owing. Sec. 6 impedes the exercise by the High Court of

in relation to all controversies between the Commonwealth and the States.

or supposed default quite irrespective of any appropriation by the

State Legislature. Such revenues may be and often are moneys _ devoted by law to special purposes. Most of the legislative and _ executive functions of the States the Commonwealth has no legal

• authority to exercise. But it is in relation to the exercise of such _ functions that the revenues of the States are expressly or impliedly ~ devoted.

5. In the analogous case where Commonwealth industrial awards "bind" the States (Engineers' Case (1) ), the enforcement of such

awards against the States after proved default raises a grave

• constitutional question, Isaacs C.J. stating in 1930 (2): "It never _ has been contended, and I do not suggest it ever could be properly _ contended, that anyone but the State Parliament could appropriate
• the King's State revenue."

6. The Financial Agreements Enforcement Act must be regarded

• either as authorizing an invasion of the King's State revenues, or

asa law authorizing the taking of moneys from citizens of one State

alone. In the latter aspect the law is expressly forbidden by the

• Constitution, sec. 51 (11.).

7. It is no answer to the former difficulty to point to sec. 105a (5) of the Constitution because (a) the system of responsible self- government in the various States is hardly to be regarded as something "contained" in their Constitutions, and (6) all valid

• legislation of the Commonwealth Parliament is treated by covering clause V. of the Constitution as having the same binding quality as the Imperial Act itself.

8. But it is assumed for the purpose of this opinion that the constitutional objections to the Financial Agreements Enforcement Act mentioned in 6, supra, should not be upheld.

_ 9 The onus still rests upon those who allege that the Act is a valid exercise of the legislative power of the Commonwealth Parlia- ment to point to some authorizing section of the Constitution. For _ sueh purposes sec. 105a (5) is not relevant because it confers no legislative power upon the Commonwealth Parliament.

_ 10. The first suggestion is that the Financial Agreements Enforce- ment Act is a law "for the carrying out by the parties" of the

(1) (1920) 28 CLR. 129, (2) (1930) 44 C.L.R., at p. 352.

But that sub-section (a) does not authorize the selection 9 remedies by the Commonwealth in the event of a party's not pe forming its duties under the Financial Agreements - such power of enforcement after breach of agreement would have been indicated by the use of some such word as "enforcement"; (b) does not authorize the passing of legislation which, in its essence, is not as. applicable to the Commonwealth itself (being a party) as to any State (being a party). For the Commonwealth Parliament to | invested with the power to "enforce" the Agreements as against the Commonwealth in the event of its breach, is a contradiction in terms Tt follows that sec. 105a (3) does not extend to the provision of coercive measures against either Commonwealth or State in the event of default; (¢) does extend. to the passing of legislation by the Commonwealth Parliament prescribing matters to. be done and functions to be exercised by the parties in the course of their performance of the Agreements. a

It follows that the Financial Agreements Enforcement Act is not authorized by sec. 105a (3) of the Constitution.

But. this was the sole power sought to be exercised by Parlia ment in passing the legislation in question. Even if it is permissible to bring other powers in aid, the legislation will be difficult to uphold as " properly framed" laws in the exercise of legislati powers not considered or purposely rejected by those who frame the Financial Agreements Enforcement Act.

The Financial Agreements Enforcement Act is not a Ia authorized by sec. 51 (xxxrx.) as dealing with any matters wl are really incidental to the exercise of any power vested in # Commonwealth Government by the Constitution. In determining this question sec. 61 of the Constitution is irrelevant, and the only relevant power of the Government which can be pointed to is 105a (1) of the Constitution, which authorizes the Commonwealt! Government only to " make " financial agreements. The Common wealth Government has no executive power to enforce any part of the Financial Agreements. , 4

It has been authoritatively determined by this Court in The Commonwealth v. New South Wales (1) that sec. 78 does not authorize such legislation as the Financial Agreements Enforcement Act. : 16. The decision of the Privy Council in the Sugar Case (2) shows the ambit of the power contained in sec. 51 (xxxrx.). The suggestion

• that the Financial Agreements Enforcement Act may be regarded asa law dealing with matters incidental to the execution by the High Court of its original jurisdiction to determine all " matters " between Commonwealth and States, cannot be supported.

17. The decision of this Court in The Commonwealth v. New South _ Wales (1) shows that the exercise of the High Court's juris- diction in matters between Commonwealth and States under sec. 15 (u1.) of the Constitution, is based upon the principle of reciprocal liability of Commonwealth and States, ie., "equal and undis- nating responsibility to obey the law or make reparation " (per acs C.J., Rich and Starke JJ. (3) ).
18. It is assumed in favour of the Commonwealth that, with respect a selected class of contracts (e.g., the Financial Agreements), the Commonwealth Parliament may pass laws giving judgment creditors remedies by way of execution, and it is again assumed that execution way of seizure of State or Commonwealth revenues is a remedy inconsistent with the Federal nature of the Constitution.
19. But a law which, with respect to the enforcement of the inancial Agreements by the High Court, gives a judgment creditor only in the event of that judgment creditor being the wealth, and denies any remedy to the States, so far from with incidents in the exercise of the High Court's jurisdiction, for something quite foreign to and inconsistent with the administration of justice as between Commonwealth and

20. The Financial Agreements Enforcement Act offends against principle of " equal and undiscriminating responsibility to obey 'the law or make reparation' which is contained in sec. 75 (u1.) of the Constitution, as much by narrowing and restricting the

(1) (1923) 32 C.LR. 200, (2) (1914) A.C, 237; 17 CLLR. 644. (8) (1923) 32 GL, at p. 214,

constitutional meaning of "matters," as determined by the H Court, for the purpose of executing a judgment in respect of "matters," as if it provided with respect to all or any " matters' that judgment creditors' remedies should be available to the Commonwealth and never to the States.

21. The Financial Agreements Enforcement Act is inconsis with sec. 105a (5) of the Constitution, because it is implied fr that sub-section that the Financial Agreements bind the Common wealth as well as the States, and bind equally in respect of each a every part of the Agreement. To provide drastic remedies, to applied only in the event of some of the parties breaking the Financial

Agreements, is to effect a substantial alteration in the contractual relationship between the seven parties. The effect of the law is t add special penalty clauses to the Financial Agreements available against the States only, and this is inconsistent with see. 105a f of the Constitution.

end - namely, the giving of a special advantage to the Commonwea and the imposition of very special disadvantages upon the State in relation to their performance of duties and their exercise of rig under the Financial Agreements.

23. Not only therefore is sec. 6, providing for execution agai

authorized by any legislative power of the Commonwealth. part of either section can be saved under sec. 15a of the 4 Interpretation Act 1901-1930. The whole of Part II. of the A depends upon the validity of these two sections and Part IL is, therefore, altra vires and void. q

that the whole of Part II. of the Act which is dependent upon th validity of secs. 5 and 6 is invalid. It is not necessary to expre any conclusion as to the validity of the Financial Agreements

said to show that part of it seems to be based upon a miscon- tion of Part III. of the first Financial Agreement.

MeTrernan J. The Financial Agreements Enforcement Act 1932, e validity of which is disputed in this action, contains (inter alia) tic provisions, novel in the law of the Commonwealth, to divert the hands of the Treasurer of the Commonwealth the revenue of a State flowing into the hands of its officers, who are authorized

by the laws of the State to collect it. These provisions are enacted carrying into effect a judgment which may be obtained by the Commonwealth in proceedings instituted pursuant to the Act against a State,for the recovery of moneys certified by the Auditor-

neral of the Commonwealth to be due and payable and unpaid yy the State under and by virtue of the Financial Agreements 'ioned in the Act (sec. 5 and secs. 7-13). The statute also makes ion for impounding the revenue of the State prior to the nencement of proceedings so that, if the Commonwealth obtains igment, the revenue can be applied in satisfaction of the judgment

It was contended for the States which were represented at the g that it is ultra vires the Parliament of the Commonwealth

| of its Parliament. An allied contention was that it is 'implied condition of the Financial Agreement that a State's tion under it to pay moneys to the Commonwealth is nal upon the Parliament of the State voting money to satisfy obligation, and it is, therefore, ultra vires the Parliament of Commonwealth to make laws for the enforcement of such an tion on the footing that it is absolute and free of any such In support of these contentions reliance was placed views expressed in this Court in Australian Railways Union 'ictorian Railways Commissioners (1) and the line of cases cited Starke J. at p. 389. It will be observed that the obligation

(1) (1980) 44 C.L.R., at pp. 352, 389-390, 391-392,

Commonwealth Court of Conciliation and Arbitration, which y created by Parliament in exercise of the powers contained in s

the Constitution of the Commonwealth is affected by sec. 105a (5), which is in these terms: " Every such agreement' and any s variation thereof shall be binding upon the Commonwealth and States parties thereto notwithstanding anything contained in this Constitution or the Constitution of the severgl States or in any law of the Parliament of the Commonwealth or of any State." The Financial Agreements Enforcement Act, which is challenged in this action, applies to agreements upon which sec. 105 operates The imperious character of the language employed in this sub-sectit 7 of the Constitution, in my opinion, renders certain the paramount force of any Financial Agreement to which the sub-section applie It restrains the Commonwealth and every State, which is a party to such an Agreement, from contravening the Agreement and rai the obligations, which the Agreement fastens on the parties, to level of an obligation arising out of the Constitution itself. Thos provisions in the Constitution of a State or in any law of Parliament of a State, which require that Parliament must appropriate revenue before it can be lawfully applied in satisfaction of the obligation of the State under any agreement or jud are clearly included among the "things" which are overr by sec. 105a (5). The proposition that the payment of moneys dut under a relevant Financial Agreement, or the satisfaction of judgment for moneys found to be due thereunder, must in la depend upon the discretion of the Parliament of a State which i a party to the Agreement, is, in my opinion, repugnant to s 105a (5) of the Constitution. The Commonwealth is a Govern not a mere confederation of States, and no State within the Comm wealth is entitled to decline to fulfil according to its legal im any obligation imposed upon it by the Constitution. Sec. 105a (4 is not a dead letter : it pulsates with the vitality of the Constitution

and imbues with the force of a fundamental law any agree- it to which it applies. In this view the contention cannot supported that the Financial Agreements Enforcement Act is because it attempts to enforce a judgment whether the Parliament has or has not appropriated revenue. The ment is a determination given under the judicial power of the ommonwealth that the State is under an obligation, regardless of contained in the Constitution or any law of the State to perform its undertaking to pay moneys to the Commonwealth. The duty to obey such an adjudication may be enforced by

question now arises as to what part of the Constitution of Commonwealth empowers the Commonwealth to enact secs. 5 6. In my opinion sec. 5 is valid under secs. 105a (3) and 105a 5), sec. 75 (11.) and sec. 51 (xxxrx.), and sec. 6 is valid under 105a (3) and 105a (5). There can be no doubt as to the ility of a State to be sued by the Commonwealth in the High it for moneys due and payable under the Financial Agreement ich was validated by the Financial Agreement Validation Act Tt was decided in The Commonwealth v. New South Wales (1) _ the expression "sovereign State" as applied to a State tralia is not justified. Isaacs, Rich and Starke JJ., in the e of their joint judgment, said (2): - ''The conclusion to we were invited to come in interpreting the Constitution the assumption that New South Wales is a 'sovereign would be both mischievous and unfounded. The term gn State' as applied to constituent States is not strictly et even in America since the severance from Great Britain. Still further from the truth is it in Australia, The "sovereign State' as applied to the construction of the ealth Constitution is entirely out of place, and worse n unmeaning." It was also decided in that case that the High urt had jurisdiction to entertain an action for tort brought by ommonwealth against the State without the consent of the te. The jurisdiction of the High Court under sec. 75 was referred ox C.J. in the above-mentioned case, at p. 204, in these

1932, pear New Sours Waues THE Commoy- Weaut [No. 1}.

terms: " The unanimous decision of the Court" in South Australiay Victoria (1)"was . . . that the word 'matters' in sec. 75 m matters which were of a like nature to those which would a between individuals and which were capable of determination upon principles of law." In the course of their judgment Isaacs, Rich and Starke JJ. also said (2) : - '* The people of New South Wales are not as are, for instance, the people of France, a distinct and separat people from the people of Australia. The Commonwealth inelud the people of New South Wales as they are united with their fellow Australians as one people for the higher purposes, of commol citizenship, as created by the Constitution. When the Con wealth is present in Court as a party, the people of New So Wales cannot be absent. It is only where the limits of the w citizenship end that the separateness of the people of a State a political organism can exist. To appeal to the analogy of entirely foreign independent State is to appeal to an impossible standard. And again this Court is not a foreign Court. It is tribunal specially created by the united will of the Australi people, as a Federal Court and as a national Court. It has v special functions in relation to the powers, rights and obligation: springing from the Constitution and the laws made under it - matter which concern the Commonwealth as the organization of the wl population of this Continent, the States in their relations to th Commonwealth and to each other, and the people in their relatio to the Commonwealth and to the States regarded as constitue parts of the Commonwealth." Sec. 105a (3) of the Constitution i in these terms: '' The Parliament may make laws for the carryu out by the parties thereto of any such agreement." The content of the power conferred by sec. 105a (3) was much deba at the hearing. I think that it extends to the enactment of lav which invoke the judicial power and aid it when it is exercised i the carrying out by the parties, or any one or more of them any relevant Financial Agreement. It may be that it is not eve law which Parliament thinks expedient for coercing the parties i carrying out the Agreement that falls within the power confel by sub-sec. 3. But the power at least extends to the ena toe

(1) (1911) 12 G.L.R. 667. (2) (1923) 32 C.L.R., at p. 200,

of such a law which is an aid to the execution of the judgment of Court pronounced in legal proceedings arising out of the

by the fact that the contracting parties are all subject to the jurisdiction of the Court, that the Financial Agreement is ot a mere political engagement but a contract of strict legal stion, and that a breach of the Agreement gives rise to a jable matter. That part of sec. 5 which prescribes a speedy by which the Commonwealth may apply to the High Court declaration that an amount of money stated in a certificate the Auditor-General to be due and payable and unpaid by the ite to the Commonwealth is due, is clearly valid as an exercise of the power of the Parliament to make laws incidental to the cution of the judicial power (sec. 51 (xxxrx.)). Sub-sec. 6 of 5, which provides in effect that the declaration made upon h an application by the Commonwealth shall be enforceable as judgment and shall operate as a charge upon all the revenues of he State, is plainly a law for enforcing the judgment, and is clearly nade with respect to a matter which is incidental to the execution the judicial power. Sec. 7 provides a method of enforcing the dgment. By sec. 5 (6) it is stated that the method contained in 7 is in addition to those already provided by law. In my opinion sec. 7 is also valid as a law with respect to a matter ncidental to the exercise of the judicial power. The remainder of Part II. is also valid on that ground. In Griffin v. South Australia

Isaacs A.C.J. said: - ' In the American case of Virginia v. Virginia (2) White C.J., for a unanimous Court, said: that judicial power essentially involves the right to enforce the sults of its exertion is elementary . . . And that this applies }0 the exertion of such power in controversies between States as ne result of the exercise of original jurisdiction conferred upon this Court by the Constitution is therefore certain.'" Light is a $0 thrown upon this question by the nana views expressed

ve action additional process relevant to Fis enforcement of authority is the exertion of a legislative and not the exercise

ai) (1924) 35 C.L.R., at p. 205. (2) (1918) 246 U.S., at p. 591.

This view of the scope of sub-sec. 3 is, in my opinion, N

of a judicial power " (Virginia v. West Virginia (1) ). Marshall (J,

invested with jurisdiction in certain specified cases, in all of which it has power to render judgment. That a power to make for carrying into execution all the judgments which the ju department has power to pronounce, is expressly conferred by

positions which reasoning cannot render plainer. . . . The Court, therefore, will only say, that no doubt whatever is entertained on he power of Congress over the subject." This passage is quoted by Wil loughby onthe Constitution of the United States, 2nd ed., vol. 11., p. 128

Reference may also be made to Bank of the United States v. Hal d (3); Board of Commissioners of Knox County v. Aspinwall (4 Riggs v. Johnson County (5). It is a well-established rule that the Executive may lawfully act in the enforcement of a judgment, a a law which empowers the Executive to do so is a valid exercise of the legislative power of the Commonwealth. The effect of sees

judgment creditor until its judgment is satisfied. When Parliament has resolved that the provisions of the Act should com

proclamation, the debtors of the State, described in the Act, become the debtors of the Commonwealth, which may recover the debt

be paid in satisfaction of the judgment, neither require nor author the use of power by the executive officers of the Commonwea

contained in this Act shall impair or diminish the control of th High Court over the execution or enforcement of any judgment ( 0 the Court." It is clear that the officers of the Commonwealth wh may act in the execution of the judgment would not be person!

(1) (1918) 246 U.S, at p. 603. (3) (1825) 10 Wheat. 51. (2) (1825) 10 Wheat., at p. 22. (4) (1860) 65 U.S. 376, at p. st, (5) (1867) 73 U.S. 166, at p. 187.

with independent executive authority, as the section reserves to the Court the control over the execution of the judgment. If the statute had provided that the judgment recovered under sec. 5 could be enforced by writs issued out of the Court and served upon the debtors of the State, in order to secure payment to the Commonwealth of moneys due and payable by them to the State, do not think that any attack could have been made upon the _ validity of such provisions. The method which Parliament has adopted to secure that result is, in my opinion, equally valid as a law for carrying the judgment into effect. Sec. 6 remains for consideration. It cannot be supported by reference to the judicial power, unaided by sec. 105 (3). I think 'it is valid under this sub-section. The effect of sec. 6 is, in my ody preservative. It interrupts the flow of revenue, thereby venting its disbursement before the judicial power can operate. sement of revenue by a State may result in the Agreement being carried out by the parties. Interpreting sec. 105a (3) a grant of power to make laws which invoke the judicial power aid it when it is exercised for the carrying out of the Agreement ry the parties or any one or more of them, I think that the limits of 105 (3) are not exceeded by a law which preserves the thing must be paid under the Agreement, that is to say, the revenues a State, until the judicial power operates. If the Court finds hat moneys are due under the Agreement, it is carried out by the er of those revenues to the Commonwealth under the authority a judgment. The revenues of the State are safeguarded by sec. 6 (4), which provides: '' At any time after such a resolution been passed by both Houses of the Parliament, the Attorney- 'of the State may apply to the High Court for a declaration no part of the amount stated in the resolution or a smaller ount than that stated in the resolution is due and payable and id by the State to the Commonwealth." Sec. 75 (1.) of the nstitution vests original jurisdiction in the High Court in all ers in which the Commonwealth or a person suing or being ued on behalf of the Commonwealth is a party. This section, as

already been mentioned, enables the Commonwealth to sue 'VOL. XLVI. 16

New Soura Financial Agreements Enforcement Act and the subsequent section

a State without its own consent (Lhe Commonwealth v. New South Wales (1)). An objection was made to secs. 5 and 7 of

for carrying a judgment into effect, that they were bad as an exercis of a power to make a law on a matter incidental to the execution of the authority vested in the Federal Judicature by sec. 75 (am), because the law does not grant the benefit of the special procedure and methods of enforcing a judgment to the States, parties a Financial Agreement, and is limited to the enforcement in part each one of three contracts. The first objection may go to the fairness of the law, but on that aspect of the Act it is not my duty to express any opinion. Moreover, a view as to its fairness is not the final test of the legal validity of such a law. These provisions do not assume to extinguish any liabilities to which the Common- wealth is subject under the Financial Agreements, nor do they deny any State the right to sue the Commonwealth and proceed judgment and execution according to law if it has a claim foun on all or any one of the Agreements. The remedy given to

matters, e.g., contracts, which are within the scope of sec. 75. The argument mainly centred upon secs. 5 and 6 and Part

and of the validity of the Financial Agreements (Commonwe Liability) Act, which was also questioned. The validity of sections, which I have upheld, does not in any way depend upon that Act. In view of my opinion that Part II., which is hea " Enforcement against State Revenue," of the Financial Agreemenl

Enforcement Act is valid, I think that the declaration claimed should not be made.

'Solicitor for the State of New South Wales, J. E. Clark, Crown H- ©. or A.

é: for the State of New South Wales. es Solicitor for the Commonwealth, W. H. Sharwood, Crown Solicitor New Sovrn

"Solicitor for the State of Victoria, F. G. Menzies, Crown Solicitor 4 1%*. Tae

for the State of Victoria. wast Solicitor for the State of Tasmania, A. Banks-Smith, Crown = -

HD. W. (HIGH COURT OF AUSTRALIA.) STATE OF NEW SOUTH WALES. . APPLICANT ; PLamtirr, AND

COMMONWEALTH AND OTHERS . Responpents. _ Derenpanrs, ei [No. 2.]

ppeal to Privy Council - Limits inter se of constitutional powers of H.C. or A. Commonwealth and States - Application to High Court for certificate - Special 1932, 'reasons - Appropriation by Commonwealth of State revenues - Division of opinion = ~

of Court - The Constitution (63 & 64 Vict. c. 12), secs, 74, 1054 - Constitution SypNeY, Alteration (State Debts) 1928 (No. 1 of 1929), sec. 2 - Financial Agreement April 18, 22. At 1928 (No. 5 of 1928) - Financial Agreement Validation Act 1929 (No. 4 of 6. wy 1920) - Financial Agreements Enforcement Act 1932 (No. 3 of 1932) - Financial C3. Rich,

4, pare stark sa Agreements (Commonwealth Liability) Act 1932 (No. 2 of 1932). senate and

On an application to the High Court for a certificate under sec. 74 of the

• Constitution that questions of law as to the limits inter se of the constitutional 'powers of the Commonwealth and of the State of New South Wales involved 'in the case of New South Wales v. The Commonwealth (No. 1], ante, 155, in re questions which ought to be determined by His Majesty in Council,

leld, by Gavan Duffy C.J., Rich, Starke, Dizon and McTiernan JJ. (Evatt J. iting), that the application should be refused.