West v Commis-

West v Commis- - [1937] HCA 26 - HCA 1937 case summary — Zoe

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Public Service. Upon his retirement from that service he became entitled to receive and did receive a pension under the Common- wealth Superannuation Act 1922. Tt was paid to him out of the fund established under that Act to provide superannuation benefits for persons employed in the Commonwealth Public Service and other benefits for their families. The fund is maintained by the contribu- tions which the Act obliges those employees to make out of their salaries and by the statutory payments made by the Commonwealth out of revenue. The benefits provided from this fund to employees, although paid upon the termination of their services, are part of the emoluments attached to their employment. During the income year ended 30th June 1933, the pension so received by West amounted to the sum of £258, and the whole of this sum was assessed by the Commissioner of Taxation for the State of New South Wales as net assessable income under the Special Income and Wages Tax (Manage- ment) Act 1933 (N.S.W.). West objected to the assessment on the grounds (a) that as the pension had been received from the Common- wealth Government it was not subject, either wholly or in part, to special income tax, and (6) that in so far as the Parliament of New South Wales had legislated to render that sum or any part thereof liable to State taxation, such legislation was ultra vires and invalid. The commissioner disallowed these objections and at West's request treated the objections as an appeal and forwarded it to the Supreme Court of New South Wales for determination. It, however, was removed from that court to the High Court under and by virtue of the provisions of sec. 40a of the Judiciary Act 1903-1933, and upon the matter coming on to be heard before Evatt J., his Honour, at the request of the parties, stated a case, in which facts substantially as appear above were set forth, for the opinion of the Full Court. Assuming that the said sum of £258 was income of West within the meaning of the Special Income and Wages Tax (Management) Act 1933 (N.S.W.), West was not entitled to any deductions therefrom under sec. 9 (3) of that Act.

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expressly or impliedly by marking limits conflicting with State legislation which is valid except for the operation of sec. 109. It is on this ground that the actual decision in Chaplin v. Commissioner of Tawes (S.A.) (1) is to be upheld as correct. Baater's Case (2), of course, is in the same position as Deakin v. Webb (3)." It appears to me quite unnecessary in the present case to do more than apply this passage to the legislation governing the appellant's position in relation to his pension. The decisive provisions in that legislation consist in secs. 19 and 26 of the Financial Emergency Acts 1931, ie., the Act No. 10 of that year as amended by the Act No. 47 of the same year. Under those provisions it was open to the Governor- General in Council to make regulations prescribing the extent to which the pension should be subject to State taxation of the descrip- tion now in question. Unfortunately no such regulation was made. It may be that this was accidental and that it was believed that the regulation actually made under sec. 19 in relation to the remuneration of officers would be extended by sec. 26 to the pensions of former officers. Much as I should like to give this construction to sec. 26 T have found it impossible to do so. But whether the omission to make the regulation was intentional or due to accident or misappre- hension, the fact remains that the legislation specifically provides a method for determining what shall be the liability of the pension to State tax and that the Federal authority has left the pension fully exposed to State tax. The decisive statement in the passage I have quoted from the Engineers' Case (4) is contained in the sentence, "Tf, on a proper construction of both Acts, they conflict, the State Act is, to that extent, invalid." Now in the present case sec. 19 as introduced by the amendment shows clearly that,except to the extent that the Governor-General may otherwise prescribe, the remuneration with which it deals shall be subject to State tax. Sec. 26 makes this provision applicable to pensions. This legislation plainly declares the degree of conflict. The conclusion is inevitable that in the absence of a regulation by the Governor-General in Council relating to pensions there is no conflict between the Federal statutory

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pension to State taxation, there is not much danger in applying to the present case the decisions upon the question whether there is _ an opposition between, on the one hand, the provision by the ; Dominion for its servants of a defined amount of salary, and, on the other hand, the inclusion of that salary in the income taxable under a Provincial law making no discrimination between Dominion ser- vants and other taxpayers. In Abbott v. City of St. John (1) the Supreme Court of Canada held that no such opposition exists. The decision was cited with apparent approval by the Privy Council in Caron v. The King (2), a case depending upon somewhat different considerations. In the recent case of Forbes v. Attorney-General for Manitoba (3) the Privy Council reached the same conclusion and (4) adopted the decision in Abbott v. City of St. John (1). But in relying upon these cases, it is necessary to notice the exact point at which they become applicable to the question before us. To the Dominion Parliament the British North America Act assigns the exclusive power of " fixing and providing for the salaries and allow- ances of civil and other officers of the Government of Canada." Upon the Provinces it confers the power of " direct taxation within the Province in order to the raising of a revenue for Provincial purpose." The first power was not considered to involve upon the part of the Dominion the provision of a salary or allowances pro- tected against general Provincial taxation. Duff C.J., as he now is, said in Abbott's Case (5): - 'I am quite unable to perceive that the power thus conferred in any way restricts the operation of the power of taxation committed to the Province. The fixing and providing for salaries seems to be, as a subject of legislation, quite distinct from the power to levy taxes in respect of income. The principle upon which the burden of the fiscal contributions exacted by a municipality or a Province shall be distributed among those persons subject to its fiscal jurisdiction seems to be a subject as far removed as possible from that dealt with in sub-section 8 of sec. 91." The situation is thus analogous to that arising in the present case, but arising not as a result of any limitation upon the powers of the Federal Parliament or of any general doctrine as to the qualities

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Tt will be seen that the grounds I have given for deciding the present case concede that if a State tax discriminated against pen- sions, salaries, or other payments made by the Commonwealth, it could not be supported. If the right to the payment were conferred by a law of the Commonwealth, prima facie the scope and intention of that law would be enough to make inoperative any attempt by the States to impose upon the payee a special burden because of his occupying that character. The State tax would be inconsistent with the law of the Commonwealth in making enjoyment of the right or benefit conferred by the latter the special occasion of a burden. The invalidity of the State law would then be a result of sec. 109 of the Constitution. But I do not think that this is the only ground upon which a discriminatory State tax on salaries, pensions or other payments received from the Commonwealth would be invalid. In the ordinary course of administration many obligations not created or defined by statute are contracted by the Commonwealth and dis- charged out of moneys lawfully available for the purpose. This is done in the exercise of the powers conferred by the Constitution, as for instance, under the operation of secs. 61, 67, 69, 70, 81, 82 and 83, or one or more of them. Surely it is implicit in the power given to the Executive Government of the Commonwealth that the incidents and consequences of its exercise shall not be made the subject of special liabilities or burdens under State law. The principles which have been adopted for determining for the purposes of sec. 109 whether a State law is consistent with a Federal statute are no less applicable when the question is whether the State law is consistent with the Federal Constitution. Since the Engineers' Case (1) a notion seems to have gained currency that in interpreting the Constitution no implications can be made. Such a method of construction would defeat the intention of any instrument, but of all instruments a written constitution seems the last to which it could be applied.

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I do not think that the judgment of the majority of the court in the Engineers' Case (1) meant to propound such a doctrine. It is inconsistent with many of the reasons afterwards advanced by Isaacs J. himself for his dissent in Pirrie v. McFarlane (2). Indeed, he there refers to "'the natural and fundamental principle that, where by the one Constitution separate and exclusive governmental powers have been allotted to two distinct organisms, neither is intended, in the absence of distinct provision to the contrary, to destroy or weaken the capacity or functions expressly conferred on the other." He adds: ''Such attempted destruction or weakening is prima facie outside the respective grants of power." There is little justification for seeking to find in the Engineers' Case (1) authority for more than was decided. The importance alike of the principle there applied and of the application given to it is sufficiently great and far reaching. It is a principle adopted for the interpreta- tion of the legislative powers of the Parliament. The principle is that whenever the Constitution confers a power to make laws in respect of a specific subject matter, prima facie it is to be understood as enabling the Parliament to make laws affecting the operations of the States and their agencies. The prima facie meaning may be displaced by considerations based on the nature or the subject matter of the power or the language in which it is conferred or on some other provision in the Constitution. But, unless the contrary thus appears, then, subject to two reservations, the power must be construed as extending to the States. The first reservation is that in the Engineers' Case (1) the question was left open whether the principle would warrant legislation affecting the exercise of a preroga- tive of the Crown in right of the States. The second is that the decision does not appear to deal with or affect the question whether the Parliament is authorized to enact legislation discriminating against the States or their agencies.

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came before the High Court in Chaplin's Case (1). The Act merely declared, in accordance with the above suggestion of Griffith C.J., that " the taxation by a State, in common with other- salaries earned within the State " of the salaries earned in the State by Commonwealth officers should not, if the quantum of tax was not higher than that imposed on salaries of the same amount earned - in the State, "be deemed . . . an interference with the exercise of any power of the Commonwealth." It will be observed that the legislation did not purport to authorize a State to tax Commonwealth officers' salaries. Accordingly the . argument that, under sec. 109 of the Constitution, a Commonwealth law providing a salary for a Commonwealth officer was inconsistent with a State law taxing that salary (in common with others) still remained open to the taxpayer. It was not employed, nor was any reference made to sec. 109 in the judgment. This again shows that the only ground upon which Griffith C.J., Barton and O'Connor JJ. - (Isaacs and Higgins JJ. did not sit in Chaplin's Case) thought invalidity could attach to the operation of State income tax legisla- tion against salaries of Commonwealth officers was that of the - " implied immunity of Commonwealth (and State) instrumentalities," and that immunity was not a personal right of the servant, but a right of the Government, which could waive it by appropriately - worded legislation (2). In Chaplin's Case (2) the court said, in relation to the grant of salaries : "The grant, if no more is said, is free from taxation by the State, but in making the grant the Commonwealth may say that the grant to the individual is subject to State taxation " This passage also is concerned only with the doctrine of immunity of instrumentalities, and cannot be used as any justification for the theory that, unless grants of Commonwealth salaries or pensions are expressly subjected to general income tax legislation of a State, sec. 109 should be deemed to invalidate the State legislation so far as applicable to such salaries or pensions. The Engineers' Case. The general doctrine of immunity of instrumentalities had numerous and startling applications before it was overthrown in the Engineers' Case (3). As Higgins J. said in 1925,

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as well, for its conclusion that Commonwealth salaries were exempt from the operation of State income tax laws. Referring to that ground, the justices in the Hngineers' Case (1) said : - " The second ground depends on the construction of the Commonwealth Act with which the State Act is alleged to conflict. If, on a proper construc- tion of both Acts, they conflict, the State Act is, to that extent, invalid. But that is so by force of the express words of sec. 109, and not by reason of any implied prohibition." The present problem depends for its solution on the same considerations. The authority of the Engineers' Case was not impugned in argument. It follows that the appellant's liability to State taxation turns on the question whether it would be consistent with the Commonwealth fixing the measure of the benefit which that law intends that the appellant should receive by way of pension, for the State Act to include his pension within the income upon which he is liable to pay income tax to the Government of New South Wales. In Chaplin's Case (2), Griffith C.J., with whom Barton and O'Connor JJ. agreed, said that the grant of a salary by the Commonwealth to an employee for the performance of his duties is the same in principle as the grant of a franchise to an individual or a company. He added: " The grant, if no more is said, is free from taxation by the State, but in making the grant the Commonwealth may say that the grant to the individual is subject to State taxation." (Compare The Commonwealth v. Queens- land (3); Fairbairn v. Comptroller of Stamps (Vict.) (4).) Thereason. given by the Chief Justice for this view is not unrelated to the con- demned doctrine of implied prohibition. Nevertheless the conclusion reached in Chaplin's Case (5) that the salary was taxable within the limits marked out by the Commonwealth Salaries Act 1907 was approved in the Engineers' Case, on the ground that after the passing of the Commonwealth Salaries Act there was no inconsistency between Commonwealth law with respect to the remuneration of Common- wealth employees and State law which included that remuneration within his taxable income, provided that the taxation was within the limits marked out by the Commonwealth Salaries Act.

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Judgment (340 paragraphs)

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