Chapter 2 — Major Cases 1

Chapter Two — Major Cases 1

From The High Court of Australia 1903-2003 by Crispin Hull

The High Court’s work and influence can be seen through the cases it hears and determines. Over time, the mix of the types of cases the High Court hears has changed, but its most significant role has always been in constitutional interpretation. Between 1907 and 1976 it was the only Court in Australia in which some constitutional matters could be heard – those that concerned the limits of the powers of the State and the Commonwealth. Over time, appeals from the High Court to the Privy Council in London were restricted and finally abolished. In its early days, a lot of the High Court’s work was hearing and determining matters at first instance involving Federal law, such as copyright, patents, tax, immigration, applications for orders against Commonwealth officers and so on. There was even a murder trial conducted in the High Court – before Justice Dixon and a jury in Canberra in 1933. Until 1933 when it got its own Supreme Court, the rare major cases arising in the Australian Capital Territory went at first instance to the High Court. Litigants have been able to appeal to the High Court from State Courts since the High Court’s establishment. Further appeals in those cases from the High Court to the Privy Council were abolished in 1975 and appeals directly from State Courts to the Privy Council were abolished in 1986 – making the High Court the final court of appeal from State Supreme Courts on all matters. As Australia grew more populous this wide jurisdiction created an impossible workload. During the century the trend in cases has been away from first instance cases and away from hearing appeals as of right.

The High Court remains the principal forum for the resolution of controversies between the Commonwealth and a State or between individual States. However, the hearing at first instance of matters involving Federal law is now almost totally the preserve of State Supreme Courts, the Federal Court of Australia (since its establishment in 1977) and the Family Court (since its establishment in 1976), though any constitutional matter can be removed directly to the High Court on the application of the Commonwealth Attorney-General. Further, since 1984, a litigant’s right to appeal to the High Court from the State Courts in any matter involving more than $20,000 has been removed. The High Court will hear an appeal only if the High Court grants special leave. It grants special leave in only about one in five cases – usually because the case presents an issue of great importance or involves a question that has been dealt with by different State Courts in an inconsistent way. The High Court has never issued advisory opinions. The Court has held that the Constitution requires that it only hears matters in which some right, duty or liability is to be determined.

So today the High Court’s work is almost totally concerned with constitutional matters and the hearing of appeals from the States and the Federal and Family Courts and in matters of significance (as determined by the Court itself).

Through the cases we can see how the High Court’s interpretation of the Constitution and the general law has influenced the social, political and economic development of Australia. The Court’s approach to the Constitution has changed over the century. Usually the changes have been gradual, but some major changes have been taken in a single leap. We now turn to some of the most significant cases.

The Engineers Case

<subhead>Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129

In its first 17 years, the High Court developed, through a number of cases, two doctrines about the power of the States. One was the doctrine of reserved State powers and the other was the doctrine of immunity of instrumentalities.

Implied prohibitions

The first doctrine was that, at the time of Federation, the States handed a list of powers to the Commonwealth (mostly set out in section 51 of the Constitution). These were concurrent powers. That meant the States could still exercise any of those powers if the Commonwealth did not legislate in the area. The States, under the implied prohibitions doctrine, were entitled to exercise all the remaining powers to their full extent. The doctrine was based on both the way the United States Supreme Court had interpreted the United States Constitution and upon an interpretation of section 107 of the Australian Constitution (since overruled), which said that the powers of the colonies would continue unless they were “exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of a State”. It meant that the Court ascertained the scope of the relevant State powers first and then interpreted the express Commonwealth powers in such a way that they did not intrude upon the area of State power – the reserved State powers. The list of subjects assigned to the Commonwealth left a wide area of reserved authority for the States. For example, the exclusive power over excise taxes given to the Commonwealth in the Constitution was held not to affect a State’s power to levy licence fees on businesses that sold alcohol. And a Commonwealth attempt to levy a selective excise against producers of agricultural equipment who did not satisfy certain labour conditions was held to be invalid despite the power over elements of industrial relations given to the Commonwealth in the Constitution. In each case it was held that the Commonwealth was intruding into areas reserved for the States.

Immunity of instrumentalities

This doctrine was based on the idea that the Commonwealth and the States each had a form of sovereign independence. It meant that the Commonwealth could not interfere with the ordinary exercise of State legislative or executive power and vice-versa. So Commonwealth public servants did not have to pay State income taxes (which existed in those days). And State employees (like railway workers) did not have to submit to the Commonwealth industrial and arbitration system.

Together the two doctrines tended to restrict Commonwealth power at the expense of State power. The doctrines, which reached their zenith of development in 1906, were laid out by the first appointees to the Court: Justices Griffith, Barton, and O’Connor. But over the next 14 years, leading up to the Engineers Case, the doctrines were to be attacked and finally overturned as the size and composition of the Court changed.

New appointees to the Court

In 1906 representations were made by the judges to increase the number of Justices. The representations carried great force. The Court had to deal with a growing list of cases in both its appellate and original jurisdictions – 64 appeals and 72 motions and applications in 1905. Justice O’Connor also had to find time to sit as President of the Court of Arbitration. Attorney-General Isaac Isaacs steered through a Judiciary Bill in 1906 expanding the Court to five. Isaacs himself was appointed a Justice along with Henry Bournes Higgins. The new appointees attacked the two doctrines, but they were a minority. After the death of O’Connor in 1912, Attorney-General Billy Hughes successfully steered a further increase in the Court’s numbers through the Parliament. Frank Gavan Duffy was appointed to succeed O’Connor and Albert Bathurst Piddington and Charles Powers were appointed to the two new positions – neither had the full confidence of the legal profession. Piddington resigned before taking his seat after it was revealed he had replied affirmatively to a telegram from Hughes asking about his attitude to Commonwealth power. His place, not taken up, was taken instead by George Rich. Powers had little impact on the Court, giving fewer than 30 individual written judgments in his 16 years on the bench. Griffith retired in 1919 and was succeeded as Chief Justice by Adrian Knox and Hayden Starke was appointed on the death of Barton in 1920.

So, with the original three judges gone, the stage was set for a major shift in constitutional interpretation – a shift that would profoundly affect the relative positions of the Commonwealth and States in the federation. The opportunity to revisit the doctrines arose out of an industrial dispute. The national engineers union, the Amalgamated Society of Engineers, wanted the right to enter employers’ premises to check on the working conditions of apprentices. The employers resisted. Some of the 843 employers involved were State Government Departments and others were State-owned instrumentalities.

The Constitution gives the Commonwealth Parliament power to make laws with respect to “the conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State’’. The Commonwealth Conciliation and Arbitration Act 1904 (Cth) provided for a Commonwealth Court of Conciliation and Arbitration to deal with interstate industrial disputes such as the engineers’ dispute. But the States objected to having their departments and instrumentalities being subjected to that Court’s rulings. They relied on the doctrine of reserved State powers and the doctrine of immunity of instrumentalities.

Doctrines overruled

Before the High Court, Robert Menzies – later Australia’s longest serving Prime Minister – saw himself as a junior barrister pitted against senior counsel representing several States. Menzies successfully argued against the two doctrines. A majority of the Court — Chief Justice Knox and Justices Isaacs, Higgins, Rich and Starke, with Justice Gavan Duffy dissenting – held that the Commonwealth Parliament had power to make laws binding on State ministers, departments and instrumentalities as employers with respect to industrial disputes extending beyond the limits of one State.

The judges said the correct approach was to construe the meaning of the words of the Constitution like any other law to see what power had been given to the Commonwealth. Once that was done a prohibition against the exercise of that power could not be implied. If an Act of Parliament came within that power in the Constitution it would be valid unless there was some specific limitation or restriction of the power stated in the Constitution. Section 107 of the Constitution continued the previously existing powers of the States, but it did not reserve to them any power from the Commonwealth. If a power fell to the Commonwealth under the Constitution and the Commonwealth exercised it, the State power would have to give way. Section 109 of the Constitution gave supremacy to every valid Commonwealth Act over every State Act.

The diminishing rights of the States

This case in effect swept aside the notion that the States’ had some implied powers where the Commonwealth could not tread. The limits of the respective powers of the States and the Commonwealth had to be found in the words of the Constitution itself. The Commonwealth could exercise its listed powers within the ordinary meaning of the words. Over the years, the Commonwealth has done just that and as it has done so its legal footprint has grown larger. The Commonwealth has been able to legislate in ways that affect the operation of State instrumentalities and the States have not been able to prevent it.

The Garnishee and the Uniform Tax Cases

<subhead>New South Wales v Commonwealth (No 1) (1932) 46 CLR 155

<subhead>New South Wales v Commonwealth (No 2) (1932) 46 CLR 235

<subhead>New South Wales v Commonwealth (No 3) (1932) 46 CLR 246

<subhead>South Australia v Commonwealth (1942) 65 CLR 373

<subhead>Victoria v Commonwealth (1957) 99 CLR 575

The extent of the Commonwealth’s dominance over the States was illustrated in the Garnishee Cases in 1932 and the Uniform Tax Cases in 1942 and 1957. The Garnishee Cases also illustrated the important distinction between the application of legal principle by the judges of the High Court, on the one hand, and political arguments, on the other. That distinction has given rise to continuing tensions and misunderstandings over the role of the High Court. They arise because of the nature of the High Court’s role in the Australian federation. In federations, like Australia – unlike courts in unitary nations — the highest court frequently finds itself determining disputes between governments, usually between the central Government and one or more State Governments. Often the Governments in dispute are of different political persuasions. When the Australian High Court determines such disputes there is a danger that people will see the Court as taking sides in a political dispute or applying a party political predilection. The High Court cannot avoid people’s misconceptions, but is has successfully avoided the actual danger by the application of legal principle within a professional and intellectual tradition that recognises a received technique and processes of reasoning as the basis of decisions.

The Garnishee Cases

These cases saw a Labor State Government in New South Wales under Premier Jack Lang in dispute with an anti-Labor Commonwealth Government. The issue was whether the Commonwealth could seize the funds of the New South Wales Government in bank accounts to recover outstanding amounts, which the New South Wales Government owed the Commonwealth under the Financial Agreement of 1928-1929. The legal dispute arose in a highly charged political atmosphere. On the political level Lang refused to pay the money. He argued in the political arena that since the Financial Agreement the Great Depression had thrown many people out of work and his duty was to provide them with relief before repaying loans and interest to what he termed capitalist bankers and financiers.

The High Court was not concerned with those political issues. For the Court, it was a matter of construing the words of the Constitution to see whether the Commonwealth’s legislation that authorised the garnishee of State money held in banks was within the limits of the power. The Court held that the legislation was valid because section 105A of the Constitution said the Commonwealth could make agreements with the States with respect to the public debts of the States and the Commonwealth Parliament could make laws for the enforcement of those agreements. The Court held that legislation for imposing and enforcing a garnishee on State funds held in banks was such a law.

Two judges dissented. One was Chief Justice Gavan Duffy – appointed Chief Justice when Sir Isaac Isaacs was appointed Governor-General. Gavan Duffy was sympathetic to States’ rights doctrines and had dissented in the Engineers Case. The other was Justice Evatt. Evatt had been appointed by the new Federal Labor Government in 1930 along with Edward McTiernan. Both were seen to have strong Labor links. McTiernan had been Attorney-General in a New South Wales Labor Government and was a Labor Member of the Commonwealth Parliament at the time of his appointment. Evatt had been a Labor Member of the New South Wales Parliament before his appointment. Evatt used legal, not political, reasons to explain his dissent. Some people in Labor circles were perplexed that McTiernan had not “sided” with the embattled New South Wales Labor Government. That political approach misunderstands legal reasoning because a legal ruling that might favour a central government that at the time happens to be non-Labor easily becomes a tool in pursuit of Labor political objectives upon a change of Government, and vice-versa.

The Uniform Tax Cases

The first Uniform Tax Case, heard in 1942, saw the High Court hold in favour of the exercise of even wider central power. Once again, matters of high political contention between the States and the Commonwealth were to be decided. The Commonwealth enacted four laws, which together spelled a practical end to the States’ ability to levy income tax. One law imposed an income tax at a rate of up to 90 per cent, thereby leaving the States very little room to impose their own tax. A second law offered grants to those States which voluntarily refrained from imposing an income tax. A third law said the Commonwealth could take over any officers, offices and other physical means that the States used in any attempt to levy an income tax and the fourth law gave the Commonwealth’s taxes priority – forbidding people to pay the State tax until they had paid the Federal one.

The States challenged the laws, saying that taken together they amounted to a scheme to deprive them of their taxing power. The Court said motive had nothing to do with it. According to Chief Justice Latham:

“The validity of legislation is not to be determined by the motives or the ‘ultimate end’ of a statute. Thus the controversy before the Court is a legal controversy, not a political controversy. It is not for this or any court to prescribe policy or to seek to give effect to any views or opinions upon policy. We have nothing to do with the wisdom or expediency of legislation. Such questions are for Parliaments and the people. . . . The Court is not authorized to consider whether the Acts are fair and just as between States — whether some States are being forced, by a political combination against them, to pay an undue share of Commonwealth expenditure or to provide money which other States ought fairly to provide. These are arguments to be used in Parliament and before the people. They raise questions of policy which it is not for the Court to determine or even to consider.’’: New South Wales v Commonwealth (No 1) (1942) 65 CLR 373 at 409.

As to the objection that taken together the four laws were a scheme, Latham said that, if an Act on its own was valid, the existence of another Act (valid or invalid) could make no difference. With minor exceptions the scheme was upheld. The Commonwealth said the scheme was a wartime measure, but in the end its constitutional validity did not depend on the defence power. The scheme was not dismantled after World War II and it was challenged again in 1957. It was upheld again with exceptions that did not in practice defeat the scheme.

The practical effect of the first Uniform Tax Case was a huge transfer of money and power to the national Government. In the second half of the century, the High Court’s further interpretation of the grants power allowed for even greater Commonwealth control.

But for a time the Uniform Tax Case marked the high-water mark of Commonwealth power. During World War II, the defence power gave the Commonwealth the foundation for extensive control over the economy, but after the war Commonwealth Governments (both Labor and non-Labor) did not get their way. They found in two major High Court cases – the Bank Nationalisation and the Communist Party Cases — that there were legal limits to the powers given to the Commonwealth in the Constitution defined by the High Court that would hamper their political aims.

The Bank Nationalisation Case

<subhead>Bank of New South Wales v Commonwealth (1948) 76 CLR 1 (HC); (1949) 79 CLR 497 (PC)

In 1947 the Labor Government under Prime Minister Ben Chifley decided to nationalise the private banks. Labor had a long-standing policy of nationalising key industries. In the case of the banks, the Government was motivated, at least in part, by the fact that the Government had been rebuffed in Melbourne Corporation v Commonwealth (1947) 74 CLR 31 in which the High Court had held that the Government’s legislation to prohibit State instrumentalities from banking with private banks. The Government thought, wrongly as it turned out, that its power with respect to banking would support a law prohibiting private banking.

The Banking Act 1947 (Cth) enabled the Treasurer by notice in the Gazette to vest the shares in the private banks in the Commonwealth and to authorise the compulsory acquisition of all the assets, liabilities and management of the private banks. It also enabled the Commonwealth Treasurer to prohibit the conduct of banking business in Australia.

A record hearing

The banks and several non-Labor States at the time challenged the legislation. The case ran for 39 days, the longest in the High Court’s history, and a record unlikely ever to be beaten given the High Court’s later changes in the management of cases and argument. The case was one of the most significant in the nation’s history, politically and economically, even though the Court quite properly confined itself to the essential legal issue of whether the Banking Act within the legislative power of the Commonwealth as described in the words of the Constitution. If the Banking Act was held to be valid it would allow the Chifley Government to follow through with its stated policy to nationalise other industries and activities within the ambit of its legislative power. This could have significantly altered the way in which the Australian economy functioned.

The attack on the Banking Act

The banks marshalled a formidable legal team led by Garfield Barwick, later Chief Justice, who through this case made his reputation as a constitutional lawyer. The Commonwealth was represented by its then Attorney-General, Evatt, who had left the bench of the High Court to enter the Commonwealth Parliament in 1940. The banks and the States attacked the Banking Act on several grounds: that it was not a law with respect to any head of power in the Constitution; that it was contrary to section 92 of the Constitution which provides for freedom of interstate trade; that it was contrary to the constitutional right for just terms for the acquisition of property; that it invaded the constitutional rights of the States; that the compensation provisions attempted to oust the jurisdiction of the High Court; and it was inconsistent with constitutional arrangements for State debts. Different majorities of judges found for invalidity of critical parts of the legislation on four of the grounds. The argument about an invasion of the constitutional rights of the States failed.

The purpose of section 92

The critical legal ground upon which the legislation was held invalid was the acquisition of assets and shares. However, this ground and the question of State debts could probably have been overcome by different legislation. But the critical political and policy questions were based on the effect of section 92. Once politicians thought that the prohibition of the activity of interstate banking (or any other industry) would run foul of section 92, it was clear that any policy of the Commonwealth Labor Government for the nationalisation of industry would remain an aspiration rather than a realistic policy. The Commonwealth could run its own industrial enterprise, such as a bank or an airline, but it could not prohibit others from engaging in that interstate enterprise.

In deciding that the Banking Act ran foul of section 92, a majority of the Court put forward an “individual rights” theory of the section. Every person or corporation was entitled to be immune from governmental interference, particularly in the form of legislation, in interstate trade. Justices Rich and Williams said, “The freedom guaranteed by Section 92 is a personal right attaching to the individual.” Justice Dixon said,

“Section 92 treats inter-State traffic and intercourse, not as a mere economic phenomenon, but as an activity, and as such sets it free for people to engage in. . . . It assumes that without governmental interference trade, commerce and intercourse would be carried on by the people of Australia across State lines, and its purpose is to disable the governments from preventing or hampering that activity.”: Bank of New South Wales v Commonwealth (1948) 76 CLR 1 at 388.

The judges accepted that some regulation would be allowable and still leave interstate trade free and commerce absolutely free because, in the words of Dixon,

“the freedom of inter-State trade, commerce and intercourse which Section 92 assures supposes an ordered society where the mutual relations of man and man and man and government are regulated by law . . . . all trade and commerce must be conducted subject to law and this means compliance with a multitude of regulatory directions– a multitude of regulatory directions”: Bank of New South Wales v Commonwealth (1948) 76 CLR 1 at 389.

As it happened, the interpretation of section 92 that was seen to put a brake on nationalisation in the Bank Nationalisation Case did not stand the test of time. After a further 40 years and a diversity of judicial interpretation the Court settled on a different interpretation of the section that might have made nationalisation of some industry easier: Cole v Whitfield (1988) 165 CLR 360. But by the time that interpretation was decided, the Labor party had in effect rejected its nationalisation aims and along with the Liberal Party had engaged in the privatisation of government-owned businesses.

The judgment was appealed to the Privy Council. After a record 36 days hearing, the High Court’s judgment was upheld. However, the Privy Council’s reasoning led to later confusion and difficulties about freedom of trade and caused some puzzlement at the time, particularly the seemingly contradictory statement:

“It may be that in regard to some economic activities and at some stage of social development it might be maintained that prohibition with a view to State monopoly was the only practical and reasonable manner of regulation and that inter-State trade commerce and intercourse thus prohibited and monopolised remained absolutely free.”: Commonwealth v Bank of New South Wales [1950] AC 235.

Just as the Bank Nationalisation Case dealt a blow to a major policy aim of the Chifley Labor Government, another milestone case – the Communist Party Case – dealt a blow to a major policy aim of the new Liberal Government led by Robert Menzies.

The Communist Party Case

<subhead>Australian Communist Party v Commonwealth (1951) 83 CLR 1

Menzies led his Liberal Party to power at the end of 1949, having campaigned on what he termed the communist menace and communist influence in unions. A seven-week coal strike in 1949 shut down a lot of heavy industry and led to some electricity rationing. It was the time of the Cold War in which the communist powers of the Soviet Union and China were seen as a threat to western democracies, including Australia. But there were no actual hostilities.

One of Menzies’ first major pieces of legislation was the Communist Party Dissolution Act 1950 (Cth). The Act stated in recitals that the Communist Party was a threat. The legislation dissolved the party and provided for the appointment of a receiver to deal with its property. It also permitted the Executive Government to declare unlawful any other organisation if it was satisfied that the organisation was a threat to security. The Act said also that members of the Communist Party or other banned organisations could not be Commonwealth public servants or hold leadership positions in unions.

The validity of the Act was challenged by the party itself and seven unions and officials of those unions. Barwick was again pitted against Evatt in a great constitutional tussle. This time Barwick was representing the Commonwealth and Evatt – whose party was now in Opposition – represented the communist-led Waterside Workers Federation.

A question of interpretation

The case opened on 14 November 1950 and ran over 24 sitting days until 19 December. It was seen by many in politics and the wider community as a great civil liberties battle. However, the High Court saw the question as one of constitutional interpretation. Did the Commonwealth have legislative power to enact the measure? The Court held, with only Chief Justice Latham dissenting, that it did not. The defence power would not support the legislation. This was because the Act declared the Communist Party a threat to the Commonwealth and it banned organisations which in the opinion of the Government were a threat to the security of the Commonwealth. The Act did not ban organisations which were in fact a threat to the security of the Commonwealth based on contestable facts. The difference was crucial. The Commonwealth Parliament could not permit the Executive Government to merely assert that an organisation was a security threat and ban it, invoking the defence power. It was not for Parliament to determine the ambit of its own defence power. It was for the High Court to determine the ambit of the defence power.

The only dissenting Justice was Sir John Latham, who had been Commonwealth Attorney-General. He upheld the Act. He also upheld Parliament’s Act in the Bank Nationalisation Case (this time a Labor Party Act) along with McTiernan, another Justice with a political background.

Soon after the decision was handed down on 9 March 1951, Menzies called an election. After winning, Menzies sought approval in a referendum for the widening of Commonwealth legislative power in the Constitution to support the Communist Party Dissolution Act. But the referendum failed and it was left to the Communist Party to dissolve itself through lack of support in 1989. It was some time before the Court heard another matter as momentous for the exercise of Commonwealth power as either the Bank Nationalisation Case or the Communist Party Case.

The Court’s decisions came under criticism in the Bank Nationalisation Case from the Left and the Communist Party Case from the Right. The cases were part of wider non-legal issues of great political import that excited wide dispute and debate.

The way the High Court avoided the political controversy was perhaps best expressed by one of Australia’s leading jurists, Owen Dixon, who was appointed to the High Court on the death of Justice Higgins in 1929. On being appointed Chief Justice in 1952 he said the Court had to decide

“whether legislation is within the boundaries of allotted powers. Unfortunately, that responsibility is very widely misunderstood . . . . The Court’s sole function is to interpret a constitutional description of power or restraint upon power and say whether a given measure falls on one side of a line consequently drawn or on the other . . . and that is has nothing whatever to do with the merits or demerits of the measure. . . . Close adherence to legal reasoning is the only way to maintain the confidence of all parties in Federal conflicts . . . . There is no other safe guide to judicial decisions in great conflicts that a strict and complete legalism.”