― 180 ―

11. Chapter XI. Finance and Trade.

ALTHOUGH this is the title of chapter iv. of the Constitution, important provisions on the subject are to be found in several other parts of the instrument. In chapter i., part v., sec. 51, under “Powers of the Parliament,” the first matters mentioned in respect to which the Parliament has power to make laws are:

“1. Trade and commerce with other countries and among the States”: a power which by section 98 is declared to extend to making laws with respect to “navigation and shipping, and to railways the property of any State.”

“2. Taxation, but so as not to discriminate between States or parts of States.”

“3. Bounties on the production or export of goods, but so that such bounties shall be uniform throughout the Commonwealth.”

“4. Borrowing money on the public credit of the Commonwealth.”

The departments of customs and excise are among the State departments of public service transferred to the Executive Government of the Commonwealth, and are therefore dealt with in chapter ii.—“The Executive Government.” They are also brought within the exclusive power of the Parliament, which, by section 52, covers “matters relating to any department of the public service, the control of which is by this Constitution transferred

  ― 181 ―
to the Executive Government of the Commonwealth.”

Finally, certain sections of chapter v.—the States—also relate to finance and trade, viz., sections 112 and 113.

A. Finance.

Taxation.—Sec. 51. “The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to

“ii. Taxation, but so as not to discriminate between States or parts of States.”

The power which lies at the root of all government is thus conferred in the most unqualified terms. It is a substantive power, and not a mere incident to the accomplishment of the other purposes of the Commonwealth Government. In the second place, the terms employed extend far beyond those used in the Constitution of the United States, where Congress has power merely “to lay taxes, duties, imposts, and excises to pay the debts and provide for the common defence and general welfare of the United States”; or in the British North America Act, 1867, where the government of particular powers—the Provincial Legislature—has power to make laws with respect to “Direct Taxation within the Province in order to the raising of a revenue for Provincial purposes.” A power to make laws for the peace, order, and good government of the Commonwealth with respect to “Taxation” is prima facie more than a power to raise money by taxation, and to prescribe the matter, manner, measure, and time thereof; it is capable of embracing the whole subject of taxation, by whatever authority, throughout the Commonwealth. While the States would retain the power of regulating and imposing taxation as heretofore, their laws thereon would be subject to the paramount laws of the Commonwealth Parliament. To such an extensive construction of the power over taxation, it may, no doubt, be objected that it is a Federal Commonwealth which has

  ― 182 ―
been established; that “the power to tax is a power to destroy”; that under it the Commonwealth Parliament would have power to deprive the States of the means of carrying on their government by forbidding every conceivable mode of taxation; and that it is a cardinal doctrine of construction applied both to the Constitution of the United States and the Constitution of Canada that the extent of particular powers conveyed must be measured by the nature of the union. A notable instance of restricted construction put upon extensive words is to be found in the Slaughter-House Cases,note interpreting the Fourteenth Amendment of the Constitution of the United States, whereby no State shall make or enforce any law which shall abridge the privileges and immunities of citizens of the United States. The Supreme Court treated as irresistible the argument that a construction must be false which would involve so great a departure from the structure and spirit of American institutions as to fetter and control the States Governments by subjecting them to the control of Congress in the exercise of powers of the most ordinary and fundamental character, radically changing, in fact, the whole theory of the relation of State and Federal Governments to each other, and of both those Governments to the people. In the Slaughter-House Cases, however, the question was as to the effect of an Amendment which, had the extended meaning contended for been given to it, would have changed the relations of nearly a century by introducing Congressional and judicial control over functions which the States Legislatures had exercised independently; and the arguments of the Court would have had little or no application if the provision had been an original provision in the Constitution, so that the question would have been—What was the nature of the federal union established? The organization of the Dominion of Canada shows that the control of the federal executive over all legislative acts of the province is not inconsistent with a federal union.

  ― 183 ―
Some controlling power over taxation would be entirely within the scope and spirit of the Union. At present the State laws of taxation may be and in some cases are based upon different principles, so that property may be liable to a double taxation which is generally recognized as inequitable. Income tax and death duties may be collected upon a different basis—one State may levy the tax upon a basis of domicil, another upon the situation of property. It would be well within the spirit of federalism that such a clash of principles should be prevented by a central authority. Further, the decision of the Privy Council in Bank of Toronto v. Lambe note shows that the existence of a controlling power in the central authority leaves a larger sphere of action to the local authority than could in the absence of that control be safely allowed.

The argument of Marshall, C.J., in M‘Culloch v. Maryland,note that the “power to tax is a power to destroy,” is to some extent met by the observation of the Privy Council in the Bank of Toronto v. Lambe,note that the liability to abuse is not a sufficient reason for deciding that a power does not exist. The argument from inconvenience is one which, in any case, must be cautiously applied, and in this case it tells both ways, for in the absence of control the State can, by imposing taxation on objects taxed by the Commonwealth, embarrass the calculations of a Commonwealth Treasurer and impede the collection of federal revenue.

“Taxation” is adopted as being the most comprehensive word for describing all the various means of raising a revenue. “In the broadest sense an exercise of the taxing power occurs whenever a compulsory contribution of wealth is taken from a person, private or corporate, under the authority of the public powers” (Public Finance, by Carl Plehn, p. 77). The practice of enumerating more particularly the modes of revenue (as in the United States Constitution—“taxes, duties, imposts, and excises”) is one which a very slight acquaintance with English history condemns.

  ― 184 ―

The substantive power of taxation thus conferred is, like every other power of sovereignty, liable to abuse; but the power is legally quite independent of the conditions which attach under the Constitution to the appropriation and expenditure of the proceeds of the tax.

The power is subject to the following conditions:

1. “Taxation; but so as not to discriminate between States or parts of States.”

This is a “federal” condition for the protection of the States against the Parliament. As originally drawn, it followed the terms of the Constitution of the United States as to duties, imposts, and excises, and provided that taxation should be “uniform throughout the Commonwealth.” But this was more than the federal spirit required; it prevented not merely discrimination among the States, but discrimination in the case of individuals; and the Convention, warned by the observations of the Supreme Court of the United States in Pollock v. The Farmers' Trust (the Income Tax Case),note adopted terms of geographical limitation.

“Discriminate” is ordinarily used in two senses—“to distinguish” merely, and to “distinguish adversely.” It would be reasonable to suppose that the latter meaning attached here, as it undoubtedly does in sec. 117, both as restricting in a less degree the power which has been conferred on Parliament, and as satisfying the federal purpose of the provision. But against this view there are some forcible reasons. In the first place, “discriminate,” in its dyslogistic sense, is followed by “against” and not by “between.” In the second place, where discrimination in favour of or against a person or interest has been forbidden, the legislature has used some qualifying term to indicate the character of the prohibition; and the Courts have been careful to point out that not all discrimination, but only discrimination of a particular kind was prohibited, e.g. the “unjust discrimination” by the Inter-State Commerce Act (United States). In applying the analogous provisions of the Railways Clause Consolidation Act and the Railway

  ― 185 ―
and Canal Traffic Act, the English Courts have distinguished between the prohibition of “undue preference” and “undue prejudice” on the one hand, which casts upon them the duty of ascertaining whether the preference or prejudice is “undue,” and the obligation to impose equal rates, on the other hand, which is an “absolute statutable obligation,” and when it applies requires the Company to charge a rate “equal to all persons without reference to the particular advantage to be derived by any individuals or class of individuals.”note Similarly, in sec. 102, the Constitution itself, dealing with railways, recognizes the distinction between “preference” or “discrimination,” and “preference or discrimination which is undue or unreasonable, or unjust to any State,” by conferring power on Parliament to forbid undue or unreasonable discriminations only. Finally, the disposition of the Courts to adopt a construction favouring the more extensive power of Parliament as against one which would fetter its discretion (as by preventing it from distributing taxation according to the principle of special benefit accruing to particular areasnote) would be checked by the consideration that such a construction would cast upon the Courts the invidious duty of pronouncing upon the justice of the action of Parliament in that matter which has always been pre-eminently a matter of Parliamentary concern, and would require them to undertake the solution of difficult economic problems.

2. The Commonwealth (i.e. the Parliament) may not impose any tax on property of any kind belonging to a State (sec. 114).

This prohibition is accompanied by a provision that the State shall not impose any tax on property of any kind belonging to the Commonwealth; and section 114 may be

  ― 186 ―
compared generally with sec. 125 of the British North America Act, 1867, under which no lands or property belonging to Canada, or any province, shall be liable to taxation. In the United States it has been established by judicial decision that neither Congress nor a State Legislature may tax the “Governmental agencies” of the other. “That the power to tax involves the power to destroy; that the power may defeat and render useless the power to create; that there is a plain repugnance in conferring upon one Government a power to control the constitutional measures of another, which other, in respect to those very measures, is declared to be supreme over that which exerts the control, are propositions not to be denied.”note In the Bank of Toronto v. Lambe,note the Privy Council expressly refused to apply this doctrine to provincial taxation of corporations constituted under Dominion laws, on the ground that though the doctrine of Marshall, C.J., was applicable where “each State may make laws virtually uncontrolled by the federal power, and subject only to the limits placed by law on the range of subjects within its jurisdiction,” it was inapplicable where the controlling power possessed by the Dominion Government over provincial legislation effectually protected Dominion interests from destruction by the Provinces. Obviously that case decides nothing as to the taxation of Provincial instrumentalities by the Dominion.

In the Commonwealth the power of the State may depend upon the view taken of the Commonwealth power to make laws with respect to “taxation.” If the true meaning of that power is that the Commonwealth Parliament may control the taxation of the States, there is in the Commonwealth as in Canada a power which may intervene more effectually than the Dominion Executive to prevent an abuse of power by the States. If, as is probable, the power over “taxation” is limited to taxation imposed by the Commonwealth Parliament itself, the doctrine of Marshall, C.J., is applicable to both State and Commonwealth.

  ― 187 ―
But in such a case it might be held, though not necessarily, that both State and Commonwealth are subject to no other restriction than that specially provided in sec. 114—that neither may tax the property of the other. It may be argued that sec. 114 is exclusive of other exemptions, since “property” would be exempt as an “agency or instrumentality,” and if agencies generally are to be exempt, section 114 is superfluous. But there may be property which is not a “governmental agency,” e.g. land of the Commonwealth for a National University, or a Library or Museum, or property of a State situated in another State; and upon these, section 114 would operate. Adopting the view that the governmental agencies of the State are exempt from Commonwealth taxation, it remains to see what they are. “Governmental agencies” have been described as “the means or agencies through or by the employment of which the States perform their essential functions, since if these were not within their reach they might be embarrassed and perhaps wholly destroyed by the burdens it (i.e. the Federal Government) should impose.”note Among these agencies are municipal corporations or other governing bodies, the courts or the process of the courts, the salaries of judges or officers of a State; and, generally, every instrument employed by the government to carry its powers into execution.

Section 81. All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund.

Appropriation and Expenditure; Issue and Audit.—By section 83, “No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.”

This emphasizes the constitutional rule of the control of Parliament over expenditure, as to which there was at one time much misconception in Australia. “Appropriation by law” excludes the once popular doctrine that money might become legally available for the use of the government

  ― 188 ―
service upon the votes of supply of the Lower House. As will be seen, some appropriations of public money are made by the Constitution itself; for the rest, it will be for the Parliament to determine what matters are to be provided for by permanent and what by annual acts. The Parliament will also have to determine how public money appropriated shall be issued from the Treasury, and to make provision for ensuring that money drawn for any purpose has been expended upon that purpose. The Constitution properly leaves the details of “issue and audit” to be settled by the Parliament. Until provision is made, the existing laws of the States are to apply (sec. 97). Provision for the immediate needs of the Commonwealth is made by a clause in sec. 83, under which the Governor-General in Council may, until a month after the meeting of Parliament, draw moneys necessary for the maintenance of the transferred departments, and for holding the first elections.

The Consolidated Revenue Fund “shall be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution” (sec. 81). This provision is similar to that contained in the Constitutions of the Australian Colonies and the British North America Act, 1867.

A Consolidated Fund has long commended itself to British statesmen in preference to the assignment of specific taxes to specific charges. The ear-marking of the revenue from customs and excise by the Constitution is, however, an exception to the principle.

“Shall be appropriated” means, of course, by “the Parliament.”

What are “the purposes of the Commonwealth”? Are they limited to carrying into effect the matters committed by the Constitution to the Commonwealth Government, or has the Parliament, with its unlimited power to raise money, an unlimited power to determine what are the purposes of the Commonwealth? In the United States, after keen controversy, it is now agreed that “the power of

  ― 189 ―
Congress over the Treasury is in effect absolute, and extends to the appropriation of money for any object which in their judgment will conduce to the defence of the country or promote its welfare.”note This, however, is under an express power to “provide for the general welfare.” In Canada, the government whose powers are limited by enumeration—the provincial government—has power to raise a revenue by direct taxation “for provincial purposes”; and the Judicial Committee has held that this includes direct taxation “for a local purpose upon a particular locality,” and is not confined to general provincial purposes, and this notwithstanding that there is another article under which the Provincial Legislature may impose licenses “in order to the raising of a revenue for provincial, local, or municipal purposes.”note It must be remembered, however, that amongst the matters of provincial power are “all matters of a merely local or private nature in the Province.” The Commonwealth Government is without either of the attributes which seem material to the conclusion arrived at in the United States and in Canada. There is also some indication of a restricted power of expenditure. By section 96, the power to grant financial assistance to a State is the subject of a special grant, which, of course, suggests that such assistance could not be given under the general power to appropriate moneys for the purposes of the Commonwealth. On the other hand, the Government of the Commonwealth is a national government, and for some portions of its dominions the sole government, and it might not unreasonably be contended that, as has been said of the Government of the United States, it may play the part of “a public-spirited individual who draws his purse strings for the common good”; that it may go into the market and do whatever can be done by the use of money without the exercise of legislative, executive, or judicial power.note This does not

  ― 190 ―
necessarily involve any invasion of the powers of the State, for an unlimited power to appropriate does not imply an indefinite extension of legislative power. The Parliament might well be able to provide money for a national university and yet want the power to acquire land compulsorily for buildings or to exempt it from the operation of the State laws concerning educational institutions. In any case, the restriction on the power of appropriation and expenditure seems to be subject to political sanctions merely.

Charges and Liabilities.—“The costs, charges, and expenses incident to the collection, management, and receipt of the Consolidated Revenue Fund shall form the first charge thereon” (section 82).

This is the only matter which is specifically created a charge. The provision is similar to that in existing Constitutions; and, though the practice may be to appropriate money for these charges, there can be no doubt that the opinion of the Imperial Law Officers in 1878 is correct, that the moneys necessary are “legally available for, and applicable to, the purposes mentioned …. because they are, in fact, specifically appropriated by the Statute in question.” Other specific appropriations by the Constitution are the salary of the Governor-General, which, until the Parliament otherwise provides, shall be £10,000 (sec. 3), and the salaries of the Ministers of State, which, until the Parliament otherwise provides, shall not exceed £12,000 a year (sec. 66).

The principal “liabilities imposed by this Constitution” are the following:

1. Sec. 89.—Until the imposition of uniform duties of Customs, to pay to each State, month by month, the balance of the revenues collected by the Commonwealth in that State after debiting to it:

  • (a) The expenditure therein of the Commonwealth incurred solely for the maintenance or continuance as at the time of transfer of any department transferred.

  •   ― 191 ―
  • (b) The proportion of the State, according to the number of its people in the other expenditure of the Commonwealth.

2. Sec. 93.—During the first five years after the imposition of uniform duties of Customs, and thereafter until Parliament otherwise provides, to pay balances as provided by sec. 89, but the credit basis of each State is not collection of duties, but consumption of imports or produce in the State.

After five years from the imposition of uniform duties of Customs, Parliament may provide, on such basis as it deems fair, for the monthly payment to the several States of all surplus revenue of the Commonwealth (sec. 94). This wide power is subject to the prohibition of preferences by sec. 99, and (temporarily) to the provisions of sec. 87.

3. Sec. 87.—During a period of ten years after the establishment of the Commonwealth, and thereafter until the Parliament of the Commonwealth otherwise provides, of the net revenue of the Commonwealth from duties of customs and excise, not more than one-fourth shall be applied annually by the Commonwealth towards its expenditure. The balance shall, in accordance with this Constitution (i.e. sections 89, 93, and 94), be paid to the several States, or applied to the payment of interest on debts of the several States taken over by the Commonwealth (see sec. 105).

This is a contingent liability, and attaches to the Commonwealth only in respect to one of the possible sources of revenue. It was assumed, however, as a matter of political necessity that the Commonwealth must raise a Customs revenue; and the States which have relied in the past so largely upon the customs were not prepared for a financial revolution such as would be involved in a resort to direct taxation for all State purposes. It was generally accepted, therefore, that they must be assured of some part of their accustomed revenue; and, finally, Sir Edward Braddon's plan, “the Braddon Blot,” as it was called for a time, was adopted, as making a rough provision for the maintenance of existing conditions.

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Sec. 82. …. “And the revenue of the Commonwealth shall, in the first instance, be applied to the payment of the expenditure of the Commonwealth.”

The expression, “expenditure of the Commonwealth,” is an ambiguous one, but it is used in sections 87 and 89 to exclude payment of balances to the States and payment of State debts. The direction as to first application of revenue must be subject to the ear-marking of three fourths of the revenue from customs and excise under section 87. In fact, this provision of section 82 really belongs to the scheme of financial arrangement adopted by the Convention at Adelaide, and subsequently abandoned in favour of section 87. By that scheme the maximum “expenditure of the Commonwealth in the exercise of the original powers given to it by this Constitution” and the “expenditure of the Commonwealth in the performance of the services and the exercise of the powers transferred from the States to the Commonwealth by this Constitution” were fixed for a term of years.

In addition to the specific appropriations already referred to, there are other matters of expenditure which are either fixed by the Constitution or which, when fixed by the Parliament, are not freely alterable by it. By section 48 the salary of a member of either House is fixed at £400 a year, but only until the Parliament otherwise provides. On the other hand, the salary of a justice of the Federal Court is left to the Parliament to determine, but when fixed it shall not be diminished during his continuance in office (sec. 72). As an incident to the transfer of public departments to the Commonwealth, the Commonwealth assumes all the current obligations of the State in respect of such department (section 85, subs. iv.); is bound to compensate the State for any property passing to the Commonwealth for the purposes of a department (section 85, subs. iii.); and by section 84 the Commonwealth is subject to certain present liabilities of the State to officers of public departments taken over by the Commonwealth.

Financial Relations of the Commonwealth with the

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States.—These are involved in, but not exhausted by, the liabilities imposed upon the Commonwealth. The financial difficulties were not completely provided for by securing to each State the return of its proper proportion of revenue; for, as the colonies relied in unequal degrees upon the tariff, a Commonwealth tariff securing to one colony the return of an amount suited to its needs would embarrass others by a surplus or a deficit. It is accordingly provided (sec. 96), in terms following those adopted in sec. 87, that “during a period of ten years after the establishment of the Commonwealth, and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.” The words “and thereafter until the Parliament otherwise provides” are apt enough in sec. 87, but cause some difficulty in sec. 96. Sec. 87 is a section restrictive of the full power over appropriation; the restriction is temporary, and, after the expiration of its term, may be removed by the Parliament. But sec. 96 is enabling, and, according to the ordinary meaning of the terms used in the section, the power to assist the States would come to an end, when, after ten years, the Parliament shall “otherwise” provide, apparently by some Act of prohibition or by the mere repeal of existing Acts providing for financial assistance. It might, indeed, be urged that a legislative body cannot bind itself in the exercise of its legislative power, and that when Parliament has “otherwise provided” it can restore the status quo. But this contention has already been urged before the Judicial Committee without success. In Brophy v. A.G. of Manitoba note the Board said: “The Chief Justice of the Supreme Court (of Canada) was much pressed by the consideration that there was an inherent right in a legislature to repeal its own legislative acts, and that ‘every presumption must be made in favour of the constitutional right of a legislative body to repeal the laws which it has itself enacted.’ …. Their Lordships are

  ― 194 ―
unable to concur in the view that there is any presumption which ought to influence the mind one way or the other.”

It is to be noted, however, that section 51 (xxxvi.) expressly empowers the Parliament to make laws with respect to “any matter in respect of which this Constitution makes provision until the Parliament otherwise provides”; and probably, therefore, the power of the Parliament to grant assistance under sec. 96 is perpetual, and the period specified in sec. 96 is to be regarded as a term in the federal bargain indicating that during this transition period assistance to a necessitous State will be a proper and probable object of the Commonwealth concern. But the case is hardly in pari materia with the other cases for which “this Constitution makes provision until the Parliament otherwise provides.”

The colony whose exceptional position caused the principal difficulty in the financial adjustment was Western Australia. By section 95 Western Australia may, subject to various conditions, continue to impose duties for five years after the imposition of uniform duties of customs. These conditions are (1) that the duties shall not exceed those in force in Western Australia at the time of the imposition of the uniform duties of customs; (2) that they shall diminish by one-fifth annually; and (3) that they shall not be imposed on goods imported from without the Commonwealth except when the Western Australian duty is higher than that imposed by the Commonwealth.

The Debts of the States.—Section 105. “The Parliament may take over from the States their public debts as existing at the establishment of the Commonwealth, or a proportion thereof, according to the respective numbers of their people as shown by the latest statistics of the Commonwealth, and may convert, renew, or consolidate such debts or any part thereof; and the States shall indemnify the Commonwealth in respect of the debts taken over, and thereafter the interest payable in respect of the debts shall be deducted and retained from the portions of the surplus

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revenue of the Commonwealth payable to the several States, and if such surplus is insufficient, or if there is no surplus, then the deficiency on the whole amount shall be paid by the several States. See also sec. 87.

Customs, Excise, and Bounties.—It is in regard to customs and excise duties—“the tariff”—that there is the most immediate connection between finance and trade, since such duties are imposed as well for the regulation of trade as for the raising of a revenue; and the main purpose of the Commonwealth was to secure uniformity in such duties, and their abolition as regards the intercolonial trade.

i. On the establishment of the Commonwealth, the collection and control of duties of customs and of excise, and the control of the payment of bounties passed to the Executive Government of the Commonwealth (sec. 86); and the departments of customs and of excise in each State were transferred to the Commonwealth (sec. 69). All property of the State, used exclusively in connection with the departments controlling customs and excise and bounties, vested in the Commonwealth (which is to pay compensation therefor) for such time as the Governor-General in Council may declare to be necessary; and the Commonwealth assumed the current obligations of the State in respect to the transferred departments (section 85). The laws of the State relating to the matters transferred will remain generally in force until the Commonwealth otherwise provides in virtue of section 108; but obviously some provisions are abrogated by the mere fact of transfer from the separate governments to a single government. By section 52 the Parliament of the Commonwealth has exclusive power to make laws with respect to matters relating to the control of the departments transferred.note

ii. But notwithstanding these provisions, the States

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retain the power to impose duties of customs and excise, and to grant bounties until the imposition of uniform duties of customs by the Commonwealth Parliament. Upon such imposition of uniform duties, the power of the Commonwealth Parliament to impose duties of customs and of excise, and to grant bounties on the production or export of goods becomes exclusive, and the State laws imposing duties of customs or excise or offering bounties cease to have effect. (Section 90.)

iii. The exclusive power of the Commonwealth Parliament and the withdrawal of power from the States are subject to the following provisions:

(a) Under section 88, uniform duties of customs shall be imposed within two years after the establishment of the Commonwealth. This is of course merely a directory enactment, unattended by any sanction.

(b) Any grant of or agreement for any bounty lawfully made by or under authority of the Government of any State shall be taken to be good if made before the thirtieth day of June, 1898, and not otherwise. (Section 90.)

(c) “Nothing in this Constitution prevents a State from granting any aid to or bounty on mining for gold, silver, or other metals, nor from granting, with the consent of both Houses of the Parliament of the Commonwealth expressed by resolution, any aid to or bounty on the production or export of goods.” (Section 91.)

(d) “… A State may levy on imports or exports, or on goods passing into or out of the State, such charges as may be necessary for executing the inspection laws of the State; but the net produce of all charges so levied shall be for the use of the Commonwealth; and any such inspection laws may be annulled by the Parliament of the Commonwealth.” (Section 112.)

B. Trade.

The power of the Commonwealth and States in matters of trade, commerce, and intercourse is subject to an important restriction in section 92, which must be considered after

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we have dealt with the nature of the power of the Commonwealth under section 51 (i.) over trade and commerce with other countries and among the States.

Trade” and “Commerce.”—These terms are used in the British North American Act, 1867, and the necessity of putting some limitation upon words of such wide import has been one of the great difficulties of construing that Act. In the Commonwealth Constitution, however, they are cut down by their accompanying words, “with other countries and among the States.” The power of the Parliament, therefore, is limited to foreign and inter-state trade and commerce. It is impossible to define such a power exactly. While its nature points to fiscal and economic regulations, and particularly to the removal of those barriers to trading intercourse which arise from the existence of separate political communities, it is not limited by those objects. In Gibbons v. Ogden,note Marshall, C.J., said: “The subject to be regulated is commerce; and our Constitution being, as was aptly said at the bar, one of enumeration and not of definition, to ascertain the extent of the power, it becomes necessary to settle the meaning of the word. The counsel for the appellee would limit it to traffic, to buying and selling, or the interchange of commodities, and do not admit that it comprehends navigation. This would restrict a general term, applicable to many objects, to one of its significations. Commerce undoubtedly is traffic, but it is something more—it is intercourse. It describes the commercial intercourse between nations and parts of nations in all its branches, and is regulated by prescribing rules for carrying on that intercourse.” The Commonwealth Constitution uses the terms “trade and commerce”; but the term “trade,” while it may serve to recall the regulations of trade which belonged to our old mercantile system, does not appear to extend or alter the power of the Parliament.note

  ― 198 ―

Some assistance as to the extent of the power may be found in the Constitution itself, which declares that “the power of the Parliament to make laws with reference to trade and commerce extends to navigation and shipping, and railways the property of any State” (section 98); that Parliament “shall not by any law or regulation of trade or commerce abridge the rights of a State or the residents therein to the reasonable use of the waters of rivers for conservation or irrigation” (section 100); that Parliament “may by any law with respect to trade or commerce forbid as to railways any preference by a State or the authority constituted under any State” (section 102). The power therefore includes the regulation and control of transport and communication between the States, and the means thereof, whether they are natural or artificial, whether in public or in private hands. On the other hand, the inclusion in section 51 of “banking,” “bankruptcy and insolvency,” “bills of exchange,” and certain other matters as separate and independent heads of legislation, indicates that “trade and commerce” does not embrace the whole of what is called “commercial law.”

“Among” is “intermingled with” (per Marshall, C.J., in Gibbons v. Ogden). The power of the Parliament does not extend to making a general and uniform law on all matters of trade and commerce, however desirable such a law may appear to be; thus, in the United States, a national combination to control the production of an article, although its effects were experienced throughout the country, was held not to be a matter of inter-state commerce, and therefore could not be regulated or forbidden by Congress.note

“The commerce of a State which Congress may control must in some stage of its progress be extra-territorial. It can never include transactions wholly internal, between citizens wholly of the same community, or extend to a polity and laws, whose ends and purposes and operations

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are restricted to the territory and soil and jurisdiction of such a community.”note

Extent and Limitations of the Power.—Sections 98 and 102 (with section 104) have been already referred to as expressly asserting or extending the power of the Parliament under “trade and commerce”; and on the other hand, sections 99 and 100 define or restrict the power of the Parliament. Section 99 provides that “The Commonwealth (i.e. the Parliament) shall not by any law or regulation of trade, commerce, or revenue give preference to one State or any part thereof over another State or any part thereof.” This is an adaptation from the United States Constitution section ix., clause 6, as judicially construed in the “Passenger Cases.”note Preferences by laws of a State are not within the prohibition; they are sufficiently covered by the general power of the Commonwealth over “trade and commerce”; the special power of “The Parliament,” and the powers of the Inter-State Commission.

The Power of the ParliamentExclusive or Concurrent. —After long controversy, the Supreme Court in 1851 decided in the case of Cooley v. Board of Wardens of the Port of Philadelphia note that the power of Congress to regulate commerce with foreign nations, and among the several States, was necessarily exclusive whenever the subjects of it are national in their character, or admit only of one uniform system or plan of regulation. Where the power of Congress to regulate is exclusive, the failure to make express regulations indicates its will that the subject shall be left free from any restrictions or impositions, and any regulation of the subject by the States, except in matters of local concern only, is repugnant to such freedom.

But the power to regulate commerce covers a vast field, containing many and exceedingly various subjects, quite unlike in their nature—some demanding a single uniform rule, others as imperatively demanding diversity; in the latter case, in the absence of legislation by Congress, the State

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Legislature may properly make provision, though the matter is one of inter-State commerce. Finally, State legislation for the protection of the life, liberty, safety, health, comfort of its people, and for the protection of their property—the exercise of what is known as the “police power”—is not invalid merely because it incidentally affects inter-State commerce, if it does not extend beyond what is reasonably necessary for its legitimate purpose. But in all cases, of course, the legislation of the State, so far as it affects inter-State commerce, is liable to be over-ridden by an exercise of the paramount power of Congress.note

The main difficulty of these principles lies in their application—in determining what matters are of national concern requiring one uniform set of regulations, and what are proper for local regulation. But the statement of the difficulty suggests a question, which in a new Constitution demands consideration. It has been pertinently observednote that “the question, whether or not a given subject admits of only one uniform system or plan of regulation, is primarily a legislative question, not a judicial one. For it involves a consideration of what on practical grounds is expedient, possible, or desirable; and whether, being so at one time or place, it is at another. … It is not in the language itself of the clause of the Constitution now in question, or in any necessary construction of it, that any requirement of uniformity is found in any case whatever. That can only be declared necessary in any given case as being the determination of some one's practical judgment. The question then appears to be a legislative one; it is for Congress and not for the Courts—except indeed in the sense that the Courts may control a legislative decision so far as to keep it within the bounds of reason, of rational opinion. If this be so, then no judicial determination of the question can stand against a reasonable enactment of Congress to the contrary. …

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It would seem to follow that the Courts should abstain from interference except in cases so clear that the legislature cannot legitimately supersede its determinations; for the fact that the legislature may do this in any given case, shows plainly that the question is legislative and not judicial. … If it be thought that Congress will very likely be dilatory or negligent, or that it may even purposely allow and connive at what should be forbidden—that is quite possible. But the objection is a criticism upon the arrangements of the Constitution itself, in giving so much power to the legislature and so little to the Courts. It is to be observed, however, that the great object which the makers of the Constitution had in view as to this subject, was to secure power and control to a single hand, the general government, the common representative of all, instead of leaving it divided and scattered among the States; and that this object is clearly accomplished” by the control of Congress. These are weighty reasons against the test applied by the American Courts, and may well prevail in a political system where the courts have been long accustomed to the supremacy of the legislature. Our Courts are not likely to declare any power of the Commonwealth Parliament to be an exclusive power, unless they find good warrant for it in the Constitution itself.

Freedom of Trade and Commerce.—The section in the Constitution which bears directly on the matter is section 92, whereby

“On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.” This section was commended to the Convention as “a bit of layman's language on which no legal technicalities can be built.” The case was an unfortunate one for the exhibition of the layman's art, for of all vague and varying words in the political vocabulary, “free” is probably the worst. Here we can do no more than indicate a few of the difficulties that beset the application of the section.

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The most obvious meaning is that which springs from the association of the clause with the imposition of uniform duties, and the declaration that the power of the Parliament over customs, excise, and bounties shall be exclusive. Noscitur a sociis. “Absolutely free” would therefore mean that commerce among the States was to be free of all duties of customs and excise; and, as the power of the States to impose such duties has been already taken away by section 90, section 92 would operate as a restriction upon the Commonwealth Parliament alone. For such a limited application, some support might be found in the observations of Marshall, C.J., in Barron v. Mayor of Baltimore,note “that the limitations on power, if expressed in general terms, are naturally, and we (i.e. the Supreme Court of the United States) think necessarily, applicable to the government created by the instrument. They are limitations of power granted by the instrument itself; not of distinct governments framed by different persons and for different purposes.” But the section is associated with others, which, while expressly conferring power on the Commonwealth, are expressly taking away or saving the powers of the States, not in matters incidental or collateral, but in a matter vital to the Commonwealth. In such a case it is reasonable to suppose that the section must have a wider interpretation; that it operates upon the Commonwealth Parliament and the States; and that at the least the absolute freedom of trade, commerce, and intercourse is impaired by any charge (not merely of customs and excise duties), by whatever name it may be called or on whatever pretence it may be levied, which is in substance a tax (in the broad sense of the word) upon the intercourse of persons, or the commerce in goods among the States. Charges for services rendered are not ejusdem generis; they are in promotion, not in hindrance of intercourse. Charges for railway services, reasonable tolls for the advantage of ports and improved waterways, may be imposed. But a charge for services may become a tax if the charge is unreasonable, or if it is used

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to the prejudice of intercourse among the States. Discriminating and preferential railway charges are dealt with in section 102, and a question may well arise whether they are to be exclusively dealt with under that section, or fall also within the control of the judicial power.

It is not clear that “absolutely free” in section 92 applies to obstructions or restrictions upon commerce which are not in the nature of a tax. It is natural to turn to the American decisions for aid in this matter. There we find that the expression “free from any restrictions or impositions,” and similar phrases, are used by the Courts in describing the total inability of the States to regulate inter-State commerce. Thus, in Robbins v. Shelby County Taxing District,note the Supreme Court of the United States, stating the doctrine of constitutional law on the subject of the inter-State commerce, says: that “where the power of Congress to regulate is exclusive, the failure of Congress to make express regulations indicates its will that the subject shall be left free from any restrictions or impositions; and any regulation of the subject by the States, except in matters of local concern only, is repugnant to such freedom.” Again, in re Rahrer,note the Court says: “The laws of Iowa, under consideration in Bowman v. Railway Company, 125 U.S. 465, and Leisy v. Hardin, 135 U.S. 100. … amounted, in fact, to a regulation of (foreign or inter-State) commerce. Hence. … it was held that, so long as Congress did not pass any law to regulate it specifically, or in such a way as to allow the laws of a State to operate upon it, Congress thereby indicated its will that such commerce should be free and untrammelled, and therefore the laws of Iowa referred to were inoperative in so far as they amounted to regulations of foreign or inter-State commerce. It followed as a corollary that when Congress acted at all the results of its action must be to operate as a restraint upon that perfect freedom which its silence ensured.” In other words, “freedom” means absence from all interference. But in

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the same case the Court is careful to point out that the Constitution does not guarantee the absolute freedom of inter-State commerce, but only protects it from the embarrassment of diverse regulations by the States by confiding the powers of regulation exclusively to Congress. The Commonwealth Constitution does the very thing which the United States Constitution does not do. By a clause which binds both the Commonwealth Parliament and the States, it provides that trade, commerce, and intercourse shall be “absolutely free.” But if inter-State commerce is to be absolutely free from all interference or regulation, what becomes of the power confided to the Commonwealth Parliament to make laws with respect to trade and commerce among the States?

It may be that section 92 expresses as to the States the doctrine of non-interference with inter-State commerce, which has been declared in the United States to arise by necessary implication as to matters of a national character. If so, it must apply unequally to State and Commonwealth; and the latter, while it may be restrained by it from taxation, prohibition, and perhaps from all regulation, the essential and unequivocal nature of which is to impede commerce, may for the rest operate freely upon the matter. And, of course, it is hardly a correct assumption that every regulation of commerce, even by the State, is an intrusion upon freedom of commerce, a truth which is recognized in the sufferance of the States to deal with those matters of inter-State commerce which admit of local regulation—“aids to commerce,” as they have been called.note

The embodiment of the United States doctrine of freedom would still leave it open to the States to make laws under its police power for the life, safety, and health of its citizens, though such laws might incidentally affect foreign or inter-State commerce.note

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It is to be noticed that section 92 only becomes operative on the imposition of uniform duties of customs; and during the time preceding such imposition the Commonwealth is, like the United States, without express provision on the subject.

It is submitted that in the Commonwealth the mere grant of the commerce power to the Parliament does not make it in any way exclusive, and that the States may, until uniform duties are imposed, freely deal with inter-State commerce, except so far as they are expressly prohibited (as under section 117), or as may be inconsistent with the legislation of the Parliament. After uniform duties are imposed, the further restraint will depend on the exclusive power of the Commonwealth over duties, and on the construction put upon section 92. The Commonwealth Constitution, unlike the Constitution of the United States, makes a particular enumeration of exclusive powers; and it is reasonable to suppose that if the commerce power had been intended to be exclusive, it would have been included in the enumeration.

The Inter-State Commission.—Section 101. There shall be an Inter-State Commission, with such powers of adjudication and administration as the Parliament deems necessary for the execution and maintenance within the Commonwealth of the provisions of this Constitution relating to trade and commerce, and of all the laws made thereunder.

The nature of the Commission is indicated in the clause; it is to combine the functions of adjudication and administration. It was suggested by the Inter-State Commerce Commission in the United States and the Railway and Canal Commission in the United Kingdom, and may be

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expected to exercise powers of each of those bodies. The Inter-State Commerce Act, 1887 (U.S.), provided for the appointment of a Commission to carry out the objects of the law, which were in the main to secure just and reasonable charges for transportation; to prohibit unjust discrimination in the rendition of like services under similar circumstances and conditions; to prevent undue or unreasonable preferences to persons, corporations, and localities; to inhibit greater compensation for a shorter than for a longer distance over the same line; and to abolish combinations for the pooling of freights. The Commission is a special tribunal, whose duties, though largely administrative, are sometimes semi-judicial; but it is not a Court empowered to render judgments and enter decrees.note It investigates facts; reports and makes orders upon them; but to enforce those orders it must resort to the Courts, and the Courts may investigate the whole merits of the controversy, and form an independent judgment.

The Railway and Canal Commission in England, as constituted by the Act of 1888, is empowered to order the Railway Companies to obey the provisions of numerous Acts of Parliament, under which they are bound, amongst other things, to afford reasonable facilities for traffic; and are forbidden to give undue or unreasonable preference or advantage in favour of any person, company, or description of traffic. Such undue preference may arise from a difference in treatment to any trader or class of traders, or to the traders in any district, in respect of the same or similar merchandise, or of the same or similar services. It may intervene, not merely at the request of an individual alleging the infringement of his right, but also on the complaint of the Attorney General, the Board of Trade, and various local authorities or associations of traders or freighters, without proof that the body is aggrieved by the matter complained of, if the Board of Trade has certified the body to be a proper one. In addition to ordering the Company to redress the wrong for the future, the Commission

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may award damages to a person aggrieved in full satisfaction of any claim which the party would have had by reason of the matter of complaint. The Commission has now full power to carry out its awards, and is armed with the powers of a court of record.

How far the Inter-State Commission will resemble the one body or the other can be determined only after it is appointed, for while its powers cannot extend beyond the execution and maintenance of the provisions of this Constitution relating to trade and commerce and of all laws made thereunder, its only powers within those limits are such as the Parliament thinks it necessary to confer upon it. There is of course no means of compelling the Parliament to confer any powers upon the Commission, but it is to be noted that the power of the Parliament to forbid railway preferences as undue or unreasonable, or unjust to any State, is dependent upon a finding to that effect having been made by the Commission (sec. 102). It is well settled in England that what is undue or unreasonable is a question of fact to be determined in each case, by looking at the matter broadly and applying common sense. The fact that railways in Australia are the property of the State, and that they have been constructed in many cases for quite different reasons than immediate gain or profit from their traffic, leads to the enactment of two provisions in the Constitution:

1. That, in determining whether a preference or discrimination is undue or unreasonable or unjust to any State, regard is to be had to the financial responsibilities incurred by the State in connection with the construction and maintenance of its railways. (Section 102.)

2. Nothing in this Constitution shall render unlawful any rate for the carriage of goods upon a railway the property of a State, if the rate is deemed by the Inter-State Commission to be necessary for the development of the territory of the State, and if the rate applies equally to goods within the State and to goods passing into the State from other States. (Section 104).

The questions that have arisen in the past as to railways

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in Australia, and therefore presumably the class of case with which the Commission will be mainly concerned, are singularly different from the typical preference and discrimination cases in England and America. Speaking generally, it may be said that the problem in England and America has been how to protect the trader and the passenger against various kinds of oppression by the Railway Companies, and to discourage combination and to encourage competition. In Australia, the question has been rather how to reconcile the interests of the railway proprietors—the Governments—each of which has deemed itself entitled to a monopoly of certain traffic. It is only fair to add that cases of favour or oppression of individuals, which account for much of English and American legislation, have been conspicuously absent in Australia. Favour of localities, however, is not unknown—the anxiety of New South Wales and Victoria has been to bring the trade to their respective capitals as much as to secure traffic for their railways.

The powers of the Inter-State Commission may extend beyond the railways and transportation. They may for example be called on under section 99 to determine whether the Commonwealth has by any law of trade or commerce given preference to a State or part thereof over another State or part thereof; or, under section 100, to decide whether the Commonwealth has abridged the right of a State or resident therein to the reasonable use of the waters of rivers for conservation or irrigation. It is submitted, however, that these matters will still be within the cognizance of the Courts so far as the redress of individual grievances is concerned, as by the award of damages in proper cases. Possibly the Parliament may be able to confer upon the Commission the power to award damages to a person aggrieved which the Railway Commission in England now enjoys; but it is conceived that a person aggrieved could not be compelled to resort to the Commission, and it may be doubted whether the recovery of damages in the Inter-State Commission would be a bar to

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an action in the Courts, though of course it would affect the amount recoverable. The Inter-State Commission seems to be in the position of some other bodies which have been referred to—it has mixed administrative and judicial powers, but it is not a court. It belongs not to the “judicial power,” but to the executive—the very terms which describe its possible functions for “the execution and maintenance …. of the provisions of this Constitution,” relating to trade and commerce, “and of all laws made thereunder,” recall the terms in section 61 establishing and vesting the executive power.

Section 103. The members of the Inter-State Commission:

i. Shall be appointed by the Governor-General in Council;

ii. Shall hold office for seven years, but may be removed within that time by the Governor-General in Council on an address from both Houses of the Parliament in the same session praying for such removal on the ground of proved misbehaviour or incapacity;

iii. Shall receive such remuneration as the Parliament may fix; but such remuneration shall not be diminished during their continuance in office.