Attorney-General (Vict) v The Commonwealth

The Attorney-General for Victoria, acting on the relation of members of the Medical Society of Victoria, brought an action in the High Court against the Commonwealth and its Minister and Director-General of Health. The dispute concerned the validity of the Pharmaceutical Benefits Act 1944, which provided for the free supply of medicines to the public, appropriated moneys to pay chemists, and imposed duties on medical practitioners and chemists. The plaintiff sought a declaration that the Act was invalid and an injunction to restrain its execution. The defendants demurred to the statement of claim, arguing the Act was a valid exercise of Commonwealth legislative power.

The High Court was required to determine two primary legal issues. Firstly, whether the Attorney-General of a State possessed sufficient legal standing (locus standi) to challenge the validity of Commonwealth legislation that allegedly encroached upon State legislative powers. Secondly, the Court had to decide whether the Pharmaceutical Benefits Act 1944 was a valid law of the Commonwealth, specifically whether it was authorised by Section 81 of the Constitution, which deals with the appropriation of revenue, and Section 51(xxxix), which concerns incidental powers.

A majority of the High Court, comprising Latham C.J., Rich, Starke, Dixon, and Williams JJ., held that the Pharmaceutical Benefits Act 1944 was invalid. The Court reasoned that Section 81 of the Constitution, which permits appropriation for "the purposes of the Commonwealth," should not be interpreted as granting an unlimited power to spend money on any purpose. Instead, it was held that the appropriation power is generally linked to the legislative powers conferred upon the Commonwealth Parliament by other sections of the Constitution. The Court found that the Pharmaceutical Benefits Act went beyond a mere appropriation of funds and sought to regulate matters that fell outside the enumerated legislative powers of the Commonwealth, thus trespassing on the domain of State legislative power. The majority also affirmed that the Attorney-General of a State has standing to challenge Commonwealth legislation that invades the legislative sphere of the States, as this affects the public rights of the State's citizens. McTiernan J. dissented.

The Court's final orders were that the demurrer to the statement of claim be overruled, meaning the action could proceed. The Pharmaceutical Benefits Act 1944 was declared invalid.