LAWS1116 L4: Commonwealth-State Relations

LAWS1116 L4: Commonwealth-State Relations.

Requirement of Co-existence

Commonwealth of Australia is a constitutional federation.
By proclamation made under s 3 of the Commonwealth of Australia Constitution Act 1900 (UK) (‘CACA’) the 6 colonies were constituted as a ‘Federal Commonwealth’.
The 6 colonies became the 6 original federating States.
s 106 provided for the continuance of State Constitutions subject to the federal Constitution.
s 107: Legislative powers of the Colony continued unless exclusively vested in the Commonwealth or withdrawn by the Constitution.
s 108: Laws of the Colonies continued subject to the Constitution.
Thus the existence of the States is guaranteed, requiring federal-State coexistence.
Co-existence requires that the Commonwealth and the States do not impede each others’ constitutional powers and capacities.
The constitutional powers are:
(a) legislative;
(b) judicial;
(c) executive.

Distribution of Legislative powers

Some subjects are given exclusively to the Commonwealth
Subjects are exclusive by express words eg:
s 52(i) – Seat of government
s 52(ii) – Commonwealth public service;
s 90 – Excise and customs duties
s 114 – Naval and military forces
s 114 – Taxing Commonwealth property
s 115 – Coining money other than gold and silver coins.
Subjects exclusive to the Commonwealth by necessary implication or because they are inappropriate for the States eg:
s 27 – Determining the number of members of the House of Representatives
s 72 – Fixing the age of retirement of federal judges
s 102 – providing for the government of the territories
Act and NT Constitutions are just acts of the government, can be reappealed or changed by Parliament.
s 51(iv) – Borrowing on Commonwealth credit.
See full list 205/206 AFL: F+T
Some subjects given concurrently to the Commonwealth and the States.
All powers in s 51 other than those that are by implication or appropriateness belong exclusively to the Commonwealth.
Subjects exclusive to the States.
All subjects not given exclusively or concurrently to the Commonwealth.
Some subjects are beyond both Commonwealth and State power.
Amending the Constitution (s 128)
Abrogating the freedom of political communication
Conflict between valid Commonwealth and valid State law.
They are concurrent powers and this has resulted in conflicts.
Commonwealth law prevails over state law to the extent of the inconsistency.
This is the subject matter of the next lecture.

Limits of legislative power arising from federal-state relations

States cannot legislate against valid federal law (s 109)
What happens when State legislation does not violate federal law but impedes federal executive functions?
What happens when Commonwealth law (otherwise valid) impairs the capacity of a state to function as a state?
The Constitution does not provide express answers.

Limits of state legislative power derived from federal-state relations

Taxation

Both Commonwealth and the States have the power to impose taxes: a concurrent power.
s 114 prohibits the Cth and the States from imposing taxes on each other’s property.
As regards other taxes, the eneral rule is States can tax Commonwealth exmployees or its agencies provided:
(1) the tax is general and non-discriminatory and does not impair the Commonwealth’s powers and functions.
(2) Cth has not exercised its protective power under s 109 ie made a law in advance that precludes state law on the subject.
In West v Commissioner of Taxation (NSW), NSW tax on a retired federal public servant’s pension was upheld.
The tax law was general and non-discriminatory. The relevant federal legislation was not excluding State legislation.
For pre-Engineers position, see D’Emden v Pedder discussed below ...

State property acquired by the Commonwealth

Commonwealth Parliament has exclusive power to make laws in respect of ‘all places acquired by the Commonwealth for public purposes’: s 52(i).
Power to acquire places? P31 of s 51
No general legislative powers: Commonwealth
Acquisition on just terms from any state or person
In respect of this, Cth hold exclusive power to make law
State law does not apply to this, even if located in State.
Melbourne International Airport (Tullamarine) is a place acquired by the Commonwealth.
Victoria imposed stamp duty on a lease of a duty free shop.
Held inapplicable: Allders International v Comm of State Revenue.

Other State Laws

Early law: a State law enacted within State legislative power will fail only under s 109.
An RAAF officer driving without a licence was held to be prosecutable under the Motor Car Act (Vic): Pirrie v McFarlane.

Rule in Cigamatic

Cth v Cigamatic: State law could not remove the Commonwealth’s priority in the payment of debts in the administration of a company in liquidation.
Insolvency law: Commonwealth has a right of priority (company goes broke, then sells all assets to get money)
Commonwealth had priority they are first paid, aka pay Cth tax first.
The State Act removed this priority.
Cigamatic cannot do this.
A State cannot legislate against Commonwealth rights in relation to citizens.

Cigamatic clarified

Re Residential Tenancies Tribunal
State law cannot diminish or regulate the prerogative rights and immunities of the Cth.
Where the Cth government enjoys equal legal rights with citizens, State law cannot single out the Crown for discriminatory treatment.
State law cannot impair the capacity of the Cth to perform its constitutional functions.
State law cannot override valid Cth law: s 109.

Limits of Federal legislative power derived from federal-state relations

Pre-Engineers position

(1) Doctrine of implied inter-governmental immunities
The doctrine prohibited the Commonwealth and the States imposing burdens on each other that interfered with their constitutional powers.
The interference would be unconstitutional even if it did not actually obstruct the State or Commonwealth in performing its functions.
D’Emden v Pedder: struck down the State law requiring federal public servants to affix a 2 penny stamp on their salary receipts.
Railway and Tramway Service Case: struck out the jurisdiction of the Cth Arbitration Court over labour disputes between State governments and its employees.
(2) Doctrine of reserved powers
Held that powers not granted clearly to the Cth were reserved for the States.
To determine whether a power is granted to the Cth, it is necessary to look at express provisions as well as the federal structure and implications of the Constitution.
Engineers doctrine.
Engineers Case rejected the doctrines of implied immunities doctrine and reserved powers.
Language of s 51 must be given their widest literal meaning.
Must not be read down to give effect to the fundamental features or the basic values of the Constitution.
‘Subject to this Constitution’ refers only to express provisions, not implications.
Rule in the Melbourne Corporation Case
Banking Act 1945, s 48: (1) Except with the consent in writing of the Treasurer, a bank shall not conduct any banking business for a State or for any authority of a State, including a local governing authority.
The section did not apply to ‘State banking’.
The aim was to compel States and their instrumentalities to bank exclusively with the government owned Commonwealth bank.
It was held to be unconstitutional
The Commonwealth cannot make laws that restrict or burden a State from exercising its constitutional powers. See (1947) 74 CLR 31, 80-2 (Dixon J)
A distinction was drawn between:
(a) laws of general application; and
(b) laws singling out governments and placing burdens upon the exercise of constitutional powers or performance of constitutional functions.
Payroll Tax Case
Payroll Tax was imposed on all employers, including State governments.
Held not to impede the functions of State governments.
QEC v Commonwealth
Ongoing industrial dispute between the QEC (a State government body) and electricity workers.
Conciliation and Arbitration Act 1985 (Cth) sought to bring the dispute within the jurisdiction of the Federal Conciliation and Arbitration Commission.
Mason J: The principle contains 2 elements:
(1) Prohibition against discrimination which involves the placing on states of special burdens or disabilities.
(2) Prohibition against laws of general application which operate to threaten or curtail the continued existence of the States or their capacity to function as governments.
A law that does not discriminate may still fail under (2).
The Act considered in QEC v Cth failed both tests and was struck down.

Retreat from the two limb theory: Austin v Commonwealth.

Commonwealth law imposed a superannuation surcharge on the superannuation entitlements of State judges.
Law was unconstitutional as it interfered significantly with the States’ function relating to the appointment and remuneration of judges.
Gaudron, Gummow and Hayne JJ: There is only one test: whether the law curtails the capacity of the States to function as governments.
The Court must look at the substance and actual operation of the law.

Re Australian Education Union (AEU Case)

Earlier, R v Coldham had expanded the meaning of ‘industry’ in s 51(xxxv)
Consequently, the non-trading activities of many State government departments came under the meaning of industry.
A dispute arose when the Victorian government offered redundancy packages to some school teachers and health worker.
The union sought to bring the dispute under a federal award.
Mason CJ, Brennan, Deane, Toohey, Gaudron, and McHugh JJ:
Existence of States and capacity to function are not to be impaired by federal awards covering a vast majority of employees if the awards were confined to fixing minimum wages and working conditions which take account of their functions and responsibilities.
There is no distinction between governmental functions and trading functions of government.
An award should not affect the integrity or autonomy of a State.
Two categories of employees:
(a) non-high level officers; and
(b) high level officers.
With respect to (a) category, the following are critical to the capacity of a State to function:
Determining the number and identity of person to hire (how many to hire and who to hire);
Determining periods of appointment (part-time ,full-time, for a limited period, until retirement etc)
Determining the number and identity of person to terminate with or without notice on grounds of redundancy (how many to terminate, who to terminate) (p 232)
A Commonwealth law that interferes with the above will be unconstitutional.
Category (b) includes ministers, ministerial assistance and advisers, heads of departments and high level statutory office holders, parliamentary officers and judges.
With respect to category (b), the following are critical to a State’s capacity to function:
All the powers mentioned with respect to category (a)
Powers to determine terms and conditions.
The Court stated:
There may be a question, in some areas of employment, whether an award regulating promotion and transfer would amount to an infringement.
The answer would turn on matters of degree, including the character and responsibilities of the employee (para 392)

NSW v Commonwealth (Work Choices Case)

s 117 of the Act empowered the Full Bench of the AIRC to restrain a State industrial tribunal from dealing with a matter pending before the Federal AIRC.
A State award given contrary to a restraining order is void.
Similar provisions existed in IR law, unchallenged since 1904.
Plaintiffs argued that this affects the capacity of the State to ‘function as a government’ and to ‘exercise constitutional functions’.
Gleeson CJ, Gummow, Hayne, Heydon, and Crennan JJ:
Interference which s 117 permits is relatively minor.
The interest of a State in having a ‘State industrial authority’ determine a matter is not so vital to the functioning of the State that it affects the capacity of the State to ‘function as a government’ or to ‘exercise constitutional functions’. (para 392)

Clarke v Commissioner of Taxation

Clarke was a member of the SA lower house from 1993 to 2002.
He was entitled to superannuation under the Parliamentary Superannuation Act 1948 (SA) and other State schemes.
He was asked to pay superannuation surcharge tax chargeable under federal law.
Held unanimously: Cth Act was invalid insofaras the surcharge applied to the superannuation benefits of state legislators.
Joint judgment [62]:
State legislators are within that class of persons ‘at the higher levels of government’
They are critical to the State’s capacity to function as a government
Hence the State needs to retain the ability to fix the terms and conditions under which they serve.
French CJ listed 6 matters relevant to the question whether a Commonwealth law fails for unconstitutionally burdening States [34]
(1) Whether the law in question singles out one or more of the States and imposes a special burden or disability on them which is not imposed on persons generally;
(2) Whether the operation of a law of general application imposes a particular burden or disability on the States;
(3) The effect of the law upon the capacity of the States to exercise their constitutional powers.
(4) The effect of the law upon the exercise of their functions by the States.
(5) The nature of the capacity of functions affected.
(6) The extent to which the constitutional head of power under which the law is made authorises its discriminatory application.