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

New South Wales v Commonwealth (No 1) [1932] HCA 7 - HCA 1932 case summary — Zoe

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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 It is not reasonable that the whole scheme of judicial enforcement should be superseded by the few words in sec. 105a.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

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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,

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'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

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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

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(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

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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

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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.

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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

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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.

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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.

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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.

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'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

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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

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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

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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

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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 :- -

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 ?
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.

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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

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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

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Judgment (388 paragraphs)