Attorney-General Victoria v Andrews & Ors

[2006] HCATrans 377

[2006] HCATrans 377

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M83 of 2005

B e t w e e n -

ATTORNEY-GENERAL FOR THE STATE OF VICTORIA

Appellant

and

KEVIN JAMES ANDREWS, MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS

First Respondent

MEMBERS OF THE SAFETY, REHABILITATION AND COMPENSATION COMMISSION

Second Respondent

OPTUS ADMINISTRATION PTY LTD

Third Respondent

VICTORIAN WORKCOVER AUTHORITY

Fourth Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 2 AUGUST 2006, AT 10.18 AM

(Continued from 1/8/06)

Copyright in the High Court of Australia

__________________

GLEESON CJ:   Yes, Mr Hanks.

MR HANKS:   Your Honour, your Honour asked me a question about the payments of money by my client to the State Treasurer effectively equivalent to income tax and the statutory foundation for those payments.  It is found in a 1992 Act of the Victorian Parliament called the State Owned Enterprises Act and in section 88 of that Act, we think subsection (1) in particular gives the Treasurer power to direct our client as a State owned enterprise to make certain payments to the Treasury being amounts:

determined by the Treasurer . . . not exceeding the amount that would be payable by the State owned enterprise under the law of the Commonwealth ‑ ‑ ‑

GUMMOW J:   What section is this?

MR HANKS:   It is the section - your Honour has a reprint?

GUMMOW J:   Yes.

MR HANKS:   It may not be the most current version of the Act, your Honour.

GUMMOW J:   Reprint No 6.

MR HANKS:   Your Honour has a better reprint than we were able to find in the library.  So section 88(1).

GUMMOW J:   Section 88?

MR HANKS:   Yes, your Honour.  State Owned Enterprises Act.

GUMMOW J:   Well, we do not have that.

MR HANKS:   I am not talking about the Insurance Act, your Honour.

KIRBY J:   Do you use the payment of the dividend in any way to support your proposition?  It is accepted that you are the State.

MR HANKS:   Indeed, your Honour, and it is not a dividend; it is a payment in lieu of income tax and it is a payment contemplated under the ‑ ‑ ‑

KIRBY J:   It is not a payment out of the generosity of their hearts.  It is a payment by legislation which is quantified by reference, I assume, to the income tax.

MR HANKS:   That is so, your Honour.  I had referred to section 88(1).  There is also a subsection (3D) which gives the Treasurer power to direct a State owned enterprise to enter into what is called the National Tax Equivalent Regime and the National Tax Equivalent Regime is a regime foreshadowed by the agreement made – the intergovernmental agreement, that is – between the Commonwealth and the States and the Territories which can be found as a schedule to another Victorian Act, but I do not need to take your Honours there.

KIRBY J:   I just wondered if ‑ ‑ ‑

GUMMOW J:   I would like to see what it is.

MR HANKS:   Well, the schedule, your Honour, can be found in a Victorian Act passed in the year 2000.

GUMMOW J:   What is it?

MR HANKS:   It is the National Taxation Reform (Consequential Provisions) Act 2000, Act No 6 of that year.

GUMMOW J:   Thank you.

CALLINAN J:   Could we get a copy of that?

MR HANKS:   We can arrange that for your Honour, yes.

KIRBY J:   Presumably even in colonial times the Government Insurance Office in New Zealand paid an amount, let us not describe it by a label, to the New Zealand Treasury and I am just wondering whether the fact that an amount is paid in these circumstances is relevant in any way to the purpose for which in the Constitution this excision from federal power has been granted.

MR HANKS:   Well, your Honour might expect to find some reference to that purpose in the debates if that was a concern, but I am not conscious of any concern as to the raising of revenue or the generation of revenue through this activity in the debates.

CALLINAN J:   Mr Hanks, I really do think that before competition policy a lot of the statutory corporations in various States did pay money to the government, which was State Government, which was calculated in some way by reference to what they would have had to have paid if they were liable to pay income tax.

MR HANKS:   Would it assist your Honour if we were able to track some history ‑ ‑ ‑

CALLINAN J:   If you could, Mr Hanks, at some stage, not now.

MR HANKS:   No.  We will take that on notice, if we may.

CALLINAN J:   Because it may be relevant to the history of all of it.

MR HANKS:   Thank you, your Honour.  I wanted to respond to a suggestion from Justice Kirby at the end of yesterday’s argument.  I think your Honour suggested that it might be that a State insurer, let us say that carried on operations which in some part extended beyond the limits of the State would become subject to the full panoply of Commonwealth power under 51(xiv) in relation to all of its activities.

KIRBY J:   It is a theoretical interpretation of the constitutional provision.

MR HANKS:   Quite so.  I understand that, your Honour.  It is an interpretation that we would respectfully resist, as your Honour would understand.  We would say that the relevant phrase in 51(xiv), which is “State insurance extending beyond the limits of the State concerned”, refers necessarily to the relationship of indemnity between the State as insurer and another as insured.  If that relationship extends beyond the limits of the State, then it is that relationship which would be the proper subject of Commonwealth power.  But the other relationships into which the State insurer has entered, the other indemnity relationships, would not be the subject of Commonwealth legislative power under 51(xiv); that is how we would read it.  I do not know whether that is an adequate response, but that is, I think ‑ ‑ ‑

KIRBY J:   The question is why. Why does one read it that way given that there was a way that drafters of the Constitution could have made that clear by saying “to the extent that”?

MR HANKS:   I could risk the response, your Honour, by saying that the Convention Debates make it clear that that was the concern, that the reservation made, as it were, in the closing words of 51(xiv), the reservation from the exception, was driven by a concern very much of that kind, namely, that State insurers should not be free to do business outside the boundaries of the State and still maintain an immunity from Commonwealth regulation.  That would be one answer, your Honour.

KIRBY J:   That would not convince me because I just do not accept ‑ ‑ ‑

MR HANKS:   No.  That is why I thought it might have been a risk, your Honour, for me to venture that but it is nevertheless a ‑ ‑ ‑

KIRBY J:   And it is a fair-weather friend counsel trotted out, including the Commonwealth which has this latter day embrace of originalism which it did not exhibit in the Work Choices Case a few weeks back.

MR HANKS:   I do not want to be tarred with their brush, your Honour.

KIRBY J:   It is trotted out whenever it suits, and we have to be consistent up here.

CALLINAN J:   In the same way as the Court has been consistent for a hundred years, Mr Hanks.

GLEESON CJ:   One of the practical difficulties, Mr Hanks, is if you ask yourself what kind of law about insurance – forget the reservation and the exception for the moment – they had in mind.  If, for example, you thought they had in mind laws prescribing minimum reserves for insurance companies, it is very difficult to make that work in relation to the closing words in the paragraph.

MR HANKS:   Yes.

GLEESON CJ:   You do not relate the reserves to the, as it were, out of State business.  Maybe that is not the kind of law they had in the forefront of their minds but nowadays when you think about laws in relation to insurance, that is one of the first examples that would come to mind.

MR HANKS:   I appreciate that and, if I might make the concession, it adds some point to Justice Kirby’s observation perhaps that a law of that character, if one could not atomise it so that it had a partial application to the State insurer, might add some point to Justice Kirby’s suggested construction of the closing words.

KIRBY J:   I am not minded at the moment to think that it is a good point but I do not quite know why or how I could explain it.  It has not been raised by your opponents.

MR HANKS:   It rather invites the metaphor of the tail wagging the dog.  It would be a curious construction if the State insurer was to lose what we might otherwise describe as its immunity from Commonwealth laws supported by 51(xiv) for all of its activities if it ventured beyond the borders of the State in relation to some part of its activity.

HAYNE J:   The kind of regulation that may be thought to have been before the framers is provided by the Life Assurance Companies Act 1873 (Vic) where, for example, you find requirements to draw accounts distinguishing between Victorian business and other business and legislation which hinges about whether a company transacts business in effect on lives in Victoria.  This notion of geographic intersection with insurance business was something that colonial legislatures had dealt with.

MR HANKS:   Thank you, your Honour.  In our submission, that would support a construction of those closing words in 51(xiv) different from that floated by Justice Kirby, if I might put it that way.

HAYNE J:   What the geographical element of 51(xiv) may suggest is that at least at the forefront of consideration was the enactment of law regulating the transaction of business by insurers rather than laws dealing with risks which may or may not be the subject of insurance and that, although it seems accepted on all hands in this litigation that the impugned provision of the federal Act can be characterised as a law with respect to insurance, at least in its terms the central provision of the federal Act seems directed principally to a risk, a risk of a kind against which State law provides employers shall compulsorily insure, but at least at the forefront of the minds of those who drew 51(xiv) may have been the focus not on risk but, as you would have it, on the indemnity.

Now, I wonder whether at least some of the difficulties which seem to bristle in this case stem from the first step, namely, that it is a law with respect to insurance because it deals with a risk of a kind in respect of which there happens to be State law, not just providing that you may insure, but providing that you shall insure against risks of that same general kind.

MR HANKS:   Your Honour has identified our argument, that that is what we say allows one to characterise the impugned provision as a law with respect to insurance.

HAYNE J:   That is to say it is characterised as law with respect to insurance because of the rules enacted by a State legislature.  Is that not the proposition you have just advanced, Mr Hanks?

MR HANKS:   And it must be, your Honour, it must be, because as I submitted yesterday, State insurance is this relationship with indemnity that can be created, not only by contract, by statute.

HAYNE J:   But what makes this a law with respect to insurance is the compulsion.  Let me put to you this example.  Let it be assumed that the Commonwealth has power to enact a law adjusting the result of D’Orta‑Ekenaike.  The fact is that barristers are obliged to carry professional indemnity cover.  Is a law which in terms deals with the liability of counsel for in court negligence a law with respect to insurance?  Does it become a law with respect to insurance if the States have in their professional regulation legislation a provision saying all lawyers shall be insured against risk?

MR HANKS:   If there is a sufficient integration between those two laws, yes.  That is, if one has, as we have here, provisions requiring the Insurance Act and the Compensation Act to be read as one Act, then the answer, we would say, is yes.

HAYNE J:   Let it be assumed that not only the State provides that all barristers shall be insured, the next step is, all barristers shall be insured, they may insure with, among others, a State insurance office.  Is that a law with respect to State insurance in its operation in respect of the State insurer?

MR HANKS:   On our argument, I believe no.  I believe, on our argument, the mandatory nature of the insurance, that is, the provisions which tie the obligation to insure to a State insurer is an essential point in our argument.  So if the Court were to conclude that the reference to “State insurance” in 51(xiv) does not encompass a monopoly, a statutory monopoly, an obligation to insure with the State insurer against the identified risk, if that is not encompassed by State insurance, then our argument loses.  I believe that is fundamental. 

While I am dealing with difficult questions, Justice Hayne, might I respond to what I think was an inquiry you made yesterday about the construction of section 108A(7)(a), and I think your Honour had in mind what we might do about these common law liabilities.  That was one issue that was raised, and in the course of the discussion that followed from that someone mentioned – perhaps Justice Gummow mentioned section 44.  There are some difficulties here. 

Could I say that the way in which we would approach that question is this. The critical term in this paragraph of this subsection, 108A, is “law of a State or Territory relating to workers compensation”. What are the laws that are dealt with by this paragraph? We would say, first, they are laws creating and defining liability to pay compensation in respect of work‑related injuries. That is at a minimum. Examples of that would be section 82 of the Accident Compensation Act and section 125A of the Accident Compensation Act.

Secondly, we say that the term also encompasses laws modifying and directly supporting an employer’s liability to pay damages in respect of work‑related injuries, and our clear example there is section 134AB of the Accident Compensation Act.  We say that because - there are several reasons why we would characterise those laws or that law, 134AB, as a law relating to workers compensation.  There is an historical reason.  Historically, in its origins workmen’s compensation was no more than an adjustment of the common law liability, the adjustment being to remove the defence of common employment and to provide in some cases an insurance underpinning.  That is one reason.

The other reason is that in its terms section 134AB applies to or applies in the case of a worker who is “entitled to compensation”. Those are the very words of section 134AB(1), so that the modifications that are made to the right to recover damages in respect of an injury are modifications made in the case of such a worker or in the case of such dependants, as referred to in section 134AB(1). Further, the modifications which are made to that right to recover damages are – and I will refer the Court if I might to two further subsections of 134AB, subsections (24) and (25). There we have quite specific modifications of the right to recover damages by reference to the compensation payable under particular sections of this Act.

So we would say the second category of laws relating to workers’ compensation affected by 108A(7)(a) are the laws that I have just described, in particular, 134AB.  The third category will be laws prescribing and regulating an obligation to insure against those liabilities.  The clearest and shortest example of those laws can be found in the Insurance Act, section 7(1) and section 9.

Now, there is another potential reading of this phrase in paragraph (a), a “law of a State relating to workers compensation”.  It might be thought that it does not include the law of a State dealing with common law liability.  We would resist that construction, but if that construction were adopted, what would be the consequence?  The consequence would be that the laws that are excluded by this paragraph (a) are laws creating and defining liability to pay compensation in respect of work‑related injuries and laws that prescribe and regulate the obligation to insure against those liabilities, perhaps then leaving common law liabilities of licensed corporations to section 44.

GLEESON CJ:   Mr Hanks, you said that it was an essential aspect of your argument that a law that obliges a person to (a) insure against a certain kind of risk and (b) insure with a State insurer is a law with respect to State insurance.

MR HANKS:   Yes.

GLEESON CJ:   Well, the Commonwealth Act is not a law of that kind.

MR HANKS:   No.

GLEESON CJ:   It does not oblige anybody to insure with a State insurer.

MR HANKS:   Of course not, but it ‑ ‑ ‑

GLEESON CJ:   The Commonwealth law with which we are concerned is a law that permits somebody to enter into a regime of self‑insurance under Commonwealth legislation and then says, if you have entered into that regime of self‑insurance, you are not liable to your workers otherwise than in accordance with this Commonwealth scheme of liability.  From one point of view, that has nothing to do with State insurance.

MR HANKS:   No.  One asks this question:  what is the immediate legal and practical effect of that liberating provision?

GUMMOW J:   Well, there are two steps, are there not?

MR HANKS:   Yes, your Honour.

GUMMOW J:   As the Chief Justice said, what is the source of federal power that enables the Parliament to say to Optus, “You can get a licence under our Act, the net result of which is that you undertake to bring yourself under this Act and be a self‑insurer?

MR HANKS:   We can assume for the sake of this argument that it is 51(xx).

GUMMOW J:   Yes.

MR HANKS:   We can assume that it is the corporations power. 

GUMMOW J:   What I am really puzzling about this first step is the definition in section 100 of “eligible corporation”.  Is the head of power that which supported the Commonwealth authority which is the competitor, or the successor to which is the competitor?

MR HANKS:   It may be supportable under more than one head of power.

GUMMOW J:   But it does not look as if it is supportable, the self‑insurance idea.  The word “insurance” in the “self‑insurance” phrase is a bit of a red herring in a way.

MR HANKS:   Absolutely, yes.

GUMMOW J:   So it is outside the insurance power at that stage, it seems to me.

MR HANKS:   At that stage, that is right, yes, your Honour.

GUMMOW J:   Then you get to 108A(7)(a) which looks like a Wenn‑type provision to mark out a field.

MR HANKS:   Yes, it does.

GUMMOW J:   In marking out that field, though, it is relying on the federal insurance power, is it?

MR HANKS:   No, it is relying on the corporations power, we would say.  Whether that reliance is justified is not an issue before the Court but that is what it is relying on, we would think.

GUMMOW J:   But the corporations power itself it subject to this qualification.

MR HANKS:   Yes, that is right.  That is to the extent ‑ ‑ ‑

GUMMOW J:   That is how the argument emerged.

MR HANKS:   ‑ ‑ ‑ that it, as we put it, fractures the relationship of indemnity before the State insurer and the insured.  Then, it is properly characterised as a law with respect to insurance as well as a law with respect to, let us assume, corporations within 51(xx) and because it bears that alternative characterisation, then it is, on the principle developed by this Court in Bourke, subject to the constraint or the exception in 51(xiv).

GUMMOW J:   Does not the exception, then, looking at the insurance power itself, does not the tail start to the wag the dog because if you apply to the notion of insurance what Sir Owen Dixon said in the Banking Case about banking the federal power would include some compulsion?

MR HANKS:   But not direct to that, the State as banker.

GUMMOW J:   No, but, on your construction, the States could deny that aspect of the primary grant, which is the federal grant, to require compulsion because they will be already compelled to go somewhere else.

MR HANKS:   That is right. 

GUMMOW J:   Is not the tail wagging the dog?

MR HANKS:   It is a powerful tail, yes. 

GUMMOW J:   It is a crocodile tail.

MR HANKS:   It was a tail that was given that power in the drafting of 51(xiv).  We say that the intention was, and it is manifest in the language of the provision, to mark out an area where potentially the States can accept the policy so long as they do that through their own insurers, State insurers.

HAYNE J:   But it is the interjection, it is this step of characterisation that is essential to equate it with Bourke.  Bourke was, relevantly, no financial corporation shall engage in misleading or deceptive conduct.  The particular operation was, no financial corporation being a bank (being a State bank) shall and that encountered the carve‑out from the banking power, but if you begin from the premise that the provision with which we are concerned is properly characterised as a law with respect to insurance, I understand the argument that ensues - but it is that premise which simply niggles away at me, Mr Hanks.

MR HANKS:   I am not sure that I have the balm for that, your Honour.

HAYNE J:   Except pointing to what your opponent says, particularly in paragraphs 31 and following of their submissions where it seems accepted on all hands.

MR HANKS: Thank you, your Honour. There is one point of substance that I would like to make before concluding my oral submissions because I do not intend to elaborate any further than we have done in our written submissions on the major points we have made. Looking at section 44 and the way in which it might operate in the case, let us say, of Optus which now holds a licence, if it is to section 44 that we must turn in order to identify what happens to the common law liabilities of Optus which previously were regulated under section 134AB of the Accident Compensation Act ‑ ‑ ‑

GUMMOW J:   There is a Georgiadis operation in there.

MR HANKS:   There is a very interesting Georgiadis operation.  We would think, although this is not the occasion to argue it, that at least those causes of action which accrue before the date that the licence comes into effect cannot be affected by section 44.  There may also be an argument about causes of action that accrue after that date.  This is an interesting attempt to extend that destruction of common law causes of action.  Initially it did not apply to corporations plainly.  Initially it just applied to the Commonwealth but we have an attempted extension.  So there will be a section 51(xxxi) question as to the meaning and operation of section 44. 

There may also be a question as to whether that extinction of the cause of action falls foul of perhaps a slightly more elaborate argument based on 51(xiv) than the argument that we have put so far.  We have not had an opportunity to fully develop that yet but that is a possibility.  That is that section 44, to the extent that it interferes with that liability in respect of which there is an obligation to enter into a relationship of indemnity with the State, it may also be characterised as having an effect on State insurance.

If I could leave the substantial points there, if your Honours please, and make one short recantation.  We are persuaded that when we sought orders from this Court that if the appellant were successful that a different costs order should be made in relation to the proceedings before Justice Selway, we overreached, so we do not seek from this Court if the appeal succeeds an order that we should get our costs in the Federal Court.  We would be content if the appeal succeeds with the Court making an order as sought by the appellant that the costs order made by Justice Selway be set aside.

KIRBY J:   What is the principle on that, you being a separate corporation?

MR HANKS:   No, we are just a respondent, your Honour, to the appeal.  That is the only principle we are relying on.  Justice Selway made a costs order against us because our claim failed.  If the Attorney’s appeal succeeds, we being a respondent to that appeal and not having brought our own appeal, we think the best advantage we can get out of any orders that the Court may make, appropriate orders, would be to set aside, as the Attorney seeks, the orders made by Justice Selway, including the costs orders.  That is all.

GLEESON CJ:   Thank you, Mr Hanks.  Mr Solicitor for Western Australia.

MR MEADOWS:   May it please the Court, my learned friend, Mr Mitchell, will present the submissions on behalf of the State.

GLEESON CJ:   Yes, Mr Mitchell.

MR MITCHELL: May it please the Court, we adopt our written submissions and seek to address oral submissions as to one aspect of the nature of insurance other than State insurance which differs, we would submit, from the concept of banking other than State banking, as it appears in section 51(xiii) of the Constitution. Before doing so, can I note that it is sufficient for the purposes of our argument to assume that “State insurance” means insurance by a State as insurer without going on to consider whether it also has the extended meaning suggested in the submissions from New South Wales. So we will proceed on the assumption that it includes at least that aspect of State insurance.

Your Honours, if I may I will summarise our argument before coming to each step in turn.  What we say is that, while the approach identified in Bourke remains applicable to section 51(xiv) of the Constitution, that approach must be applied to a different subject matter. While banking is a business, it is the indemnity relationship between an insurer and insured, whether or not that relationship arises in the course of a business which is the essence of the concept of insurance.

We say it follows from that that central to the concept of State insurance is the relationship between a State insurer and its insured rather than the conduct of a business by a State insurer.  We would say that a law about that relationship, including the formation of that relationship, is a law about State insurance.  If the Commonwealth is to provide that a person need not insure, that law must not apply where the obligation is to insure with a State.  If the Commonwealth law is to be characterised validly as a law with respect to insurance other than State insurance ‑ ‑ ‑

GLEESON CJ:   But what if the Commonwealth law simply provides that a person is not under a certain kind of liability and the consequence of that is the practical consequence that the person need not insure?

MR MITCHELL: We would draw a distinction between a provision going to liability and a provision dealing with insurance against that liability. On one view, section 108A(7)(a) is concerned only with questions of liability and not addressed to insurance in respect of that liability. We have made that point at paragraphs 4 and 5 of our written submissions, but have been content to proceed for the balance of our argument on the assumption which has been adopted by the parties and the basis upon which the trial judge proceeded, that that section does remove the obligation which section 7 of the State Insurance Act would otherwise impose on a licensee to obtain insurance of the kind identified in that section, which includes insurance against liability under the State Compensation Act, the common law or otherwise.

We say that if section 108A(7)(a) is to be characterised as a law with respect to insurance, it is because it has the effect of removing that obligation which would otherwise exist to obtain insurance with a State insurer.  If that is not correct, then ‑ ‑ ‑

GUMMOW J:   You have to say a law with respect to State insurance, do you not?

MR MITCHELL:   No, in my submission, your Honour.  One has to characterise the law as one with respect to insurance other than State insurance or as a law with respect to State insurance ‑ ‑ ‑

GUMMOW J:   But this is an intrusion upon the corporations power, which looks to be the primary grant that has been used by the Commonwealth in respect of Optus.

MR MITCHELL:   Yes, your Honour.

GUMMOW J:   And in Bourke the primary grant was the corporation power too.  It was the financial corporations ‑ ‑ ‑

MR MITCHELL:   Yes, your Honour.

GUMMOW J:   So how do we get into the insurance power other than by this notion that the exception in favour of State banking applies to the other heads of power, including the corporations power?

MR MITCHELL:   We get into it through that ‑ ‑ ‑

GUMMOW J:   This is a Bayside provision then, is it not, for 109?

MR MITCHELL:   Yes.  If that is all it is, then the field that it marks out is simply one of liability to pay workers’ compensation for one’s employees or a liability for negligence or other heads of common law, then the State and the Commonwealth provisions never really intersect.  It is only if the provision can be characterised as removing the obligation which would otherwise exist to insure with the State that the provision is to be characterised as a law with respect to insurance.  As we understand the decision in Bourke, its effect is that if a law can be characterised as a law with respect to insurance, then it must be able to be characterised also as a law with respect to insurance other than State insurance if it is to be supported either by section 51(xx) or by section 51(xiv).

Now, your Honours, we begin by noting that banking is necessarily a business activity.  As Chief Justice Latham noted in the Bank Nationalisation Case 76 CLR 1 at 193 – I do not think I need take your Honours to the passage, it is a very short one:

A single transaction by an individual person who receives a deposit of money and promises to repay it is not a banking transaction.

Consistently with that approach, the Court has viewed State banking as being “the business of banking conducted by a bank owned or controlled by a State” both in Melbourne Corporation and in Bourke, the passages in Melbourne Corporation being referred to in Bourke 170 CLR 276 at 284. By contrast, insurance is a subject matter of Commonwealth legislative power which does not necessarily involve the carrying on of a business in the sense of a regular course of activity as an aspect. For example, a person who agrees on a single occasion for consideration to pay money to another person in the event of injury to the other person may enter into a contract of insurance even though they do not undertake a business of insurance. Likewise, a State entering into a contract of insurance on a single occasion may enter into a relationship of State insurance without carrying on a business.

The Commonwealth legislative power, we say, would extend to dealing with insurance contracts entered into in that manner.  For example, the Commonwealth might prohibit the persons other than registered persons or State insurers from entering into a contract of insurance at all.  That, we say, is the beginning point of the inquiry, that insurance at its essence is a relationship normally between insurer and insured.  The only qualification to that proposition may be in the case of unincorporated mutual insurance where the relationship of indemnity is between the mutually insured.

If insurance and State insurance are concerned with that kind of relationship, we say that laws about the formation of the relationship stand at the heart both of the primary power and the qualification to that power, but where the Commonwealth makes the law about whether such a relationship must, must not, may, or need not arise it makes a law with respect to insurance and a law providing that a person need not enter into a contract of insurance with a State insurer is no less a law with respect to insurance and State insurance than is a law which provides that a person must not enter into such a relationship. 

Justice Selway appears to have thought that the second kind of law was outside Commonwealth power but the first within it.  In our submission, although the content of the two laws given in that example differ, their nature remains the same.  The characterisation remains the same.

As to the content of the primary head of power, we say it is usefully summarised in the judgment of his Honour Justice Fullagar in the Insurance Commissioner v Associated Dominions Assurance Society Case which I have set out at paragraph 17 of our written submissions.  What we say is that the use of the term “insurance” in both the primary subject, insurance, and the excluded subject, State insurance, requires ‑ ‑ ‑

KIRBY J:   What page are you referring to here of Justice Fullagar’s reasons?

MR MITCHELL: In Justice Fullagar’s reasons, it is at (1953) 89 CLR 78 at 87 to 88.

KIRBY J:   I am sorry I interrupted you.  I was just trying to get the reference.

MR MITCHELL:   That, without having regard to the limitations to State insurance because it did not arise in the case before his Honour, is a useful description of the scope of laws which the Commonwealth may make with respect to insurance.

KIRBY J:   It must have been viewed at an earlier stage as a somewhat limited provision because although Mr Knibbs made that long report and dealt with all the aspects of various forms of social insurance, as he called it, in Europe, when it actually came to the business of providing forms of social insurance in Australia, it was not ventured under the insurance power, and instead steps were taken, I think, during the war, to enact section 51(xxiiiA) for pensions, maternity allowances, child endowments, unemployment and so on, all of which had been included in other countries in various forms of insurance.  Do you know why that narrower view of the insurance power, federal, was taken that led to the enactment of (xxiiiA)?

MR MITCHELL:   I am not sure that it was a narrow view of the insurance power but rather the manner in which the Commonwealth sought to provide those benefits, which was the subject of litigation, of course, in the Pharmaceutical Benefits Case, for which I am afraid I do not have the citation, but what the Commonwealth sought to do was not to provide for compulsory insurance in respect of sickness or accident but rather to provide benefits directly funded, sourced from consolidated revenue.

KIRBY J:   Does that not highlight the need always to keep in mind the distinction between, on the one hand, the substantive transaction, and on the other hand, the provision of a form of insurance that gives indemnity to sustain that transaction?

MR MITCHELL:   We would accept that as a distinction which ought be kept in mind, your Honour, and on one view is a distinction as I have indicated which section 108A(7)(a) in fact draws.  It is not talking about the insurance in respect of the liability.  It is concerned with substituting the liability under the Commonwealth Act for the liability that would otherwise arise under the State Compensation Act.

KIRBY J:   Does not that distinction sustain, arguably, the differentiation in this statutory context between a State law that provides obligations for workers’ compensation benefits and a State law which by the way, separately, provides for insurance to fund those benefits and to provide for their payment?

MR MITCHELL: That may well be so, your Honour. In our submission, the question which is raised under section 51(xiv) will always be a question of characterisation of the Commonwealth law rather than looking to the terms of the State law.

KIRBY J:   Do you not have to characterise the two?  You certainly have to characterise the State activity.

MR MITCHELL:   Again, in my submission, the answer to that question would be no.  What one is concerned with is a law of the Commonwealth which must be characterised as a law with respect to insurance other than State insurance. 

GLEESON CJ:   But it is not a law with respect to State insurance because it has a bad effect on the business of State insurers. 

MR MITCHELL:   No, your Honour.

GLEESON CJ:   If the Commonwealth enacted a law that said no trading or financial corporation shall be liable to pay damages arising out of any motor accident in which a vehicle owned by the trading corporation was involved, the State Government Insurance Office might say you have ruined our business but that is not a law with respect to State insurance.

MR MITCHELL:   No, your Honour, it is not.

GLEESON CJ:   If you look at the middle of page 87 of 89 CLR, Justice Fullagar set out the sorts of things that I assume would have been in the forefront of the minds of the drafters in relation to paragraph 14.  Laws with respect to insurance were laws about the conditions on which a person might carry on an insurance business or regulating their provisions of reserves, ensuring their financial viability. 

MR MITCHELL:   Yes, those are all things which we would accept fall within the Commonwealth’s power to make laws with respect to insurance so long as the Commonwealth law which makes that provision can be characterised as a law with respect to insurance other than State insurance.  We would say that that question will not depend upon the extent to which there is in any particular case State insurance.

GUMMOW J:   But the law in Bourke, section 52 of the Trade Practices Act, is not a law with respect to banking.

MR MITCHELL:   The Court in Bourke approached ‑ ‑ ‑

GUMMOW J:   It was a law with respect to financial corporations.  That is what they said.

MR MITCHELL:   Yes.

GUMMOW J:   But nevertheless they applied this qualification about State banking.

MR MITCHELL:   Yes, on the basis that in its application to a business of a State bank it could be characterised as a law with respect to banking as well as a law with respect to ‑ ‑ ‑

GUMMOW J:   No, a law with respect to State banking.  Anyhow, do not let me hold you up.  Section 44 of the federal Act is not a law with respect to insurance.

MR MITCHELL:   We would accept that.

GUMMOW J:   It operates on these common law rights.

MR MITCHELL: Again, we would accept that, your Honour. All of this submission proceeds on the assumption which we would not, as I have indicated, necessarily accept, that section 108(7)(a) is to be characterised as a law with respect to insurance and State insurance because it removes an obligation which would otherwise exist for a licensee to obtain the insurance required by section 7 of the State Insurance Act, so that it can be characterised as a law with respect to the formation of the insurance relationship between a State insurer and its insured. That is an assumption which is made by all parties in this litigation, and as intervener we are content to proceed on the basis that that is the position.

Your Honour the Chief Justice earlier this morning gave an example of a law which provided for a certain level of reserves to be maintained and how that would apply to a State insurer who engaged in State insurance business extending beyond the limits of the State concerned.  Can I say firstly that, in our submission, the question is again one of characterisation of the Commonwealth law, rather than whether the State Insurance Act provides for State insurance extending beyond the limits of the State concerned.

What we would say as to the meaning of the phrase “extending beyond the limits of the State concerned” is slightly different to the answer given by my learned friend, Mr Hanks.  We would say that a State insurance extends beyond the limits of the State concerned when the relationship between the State insurer and insured is entered into outside the State concerned.  We would say it is not the location of the risk that is the defining criteria, but the place where the contract of insurance, if it is a contract, is entered into.

CALLINAN J:   There has to be some limit imposed upon the ordinary extraterritoriality doctrine, does there not, under this placitum, otherwise there would be a sufficient link to enable Victoria or any State to legislate, but the provision itself really dictates or requires that some limit be put upon that.

MR MITCHELL:   Except, your Honour, that what we are concerned with is Commonwealth power, not State power.

CALLINAN J:   No, but eventually we have to look at what the State can do.  It does not matter how you describe that; it really is a question of State power too, is it not?

MR MITCHELL:   The State as a matter of power can, as long as there is a sufficient connection with the State ‑ ‑ ‑

CALLINAN J:   But that principle cannot apply without some qualification in view of the words “extending beyond the limits of the State concerned”.  You have to give those words some meaning and that meaning would almost inevitably cut down the general very broad test of nexus.

MR MITCHELL: We would say no. The question would be: is the State law within State legislative power ignoring for the moment the Commonwealth provisions? We would say yes, because there is a sufficient connection. Then the question is: is that insurance activity subject to regulation by the Commonwealth? If the Commonwealth chooses to regulate that activity, then the Commonwealth laws prevail by section 109 of the Constitution and the State law is rendered inoperative to that extent.

CALLINAN J: What can the State do, if anything, extraterritorially that would not be subject to section 109 of the Constitution? That is what I would really like to know.

MR MITCHELL:   If the State entered into a contract of insurance with a person in the State, then that contract would not be subject to Commonwealth regulation even if the insured risk or some other aspect of the insurance contract related to matters occurring outside of the State.  Take, for example, a life insurance policy.  A person takes out life insurance in New Zealand and that life insurance covers them wherever they travel.  That is not to say that it is by virtue of that fact insurance extending beyond the limits of New Zealand.  I use New Zealand as an example because that was one of the examples that was contemplated in the Convention Debates.  We would say that the essence of the concept of insurance “extending beyond the limits of the State concerned” was identified by Mr Higgins behind tab 9 of Victoria’s extrinsic materials in the first book.

CALLINAN J:   What we looked at yesterday?

MR MITCHELL:   Yes.  It is:

Federal Parliament is to have power to make laws for insurance, but it is not to have power to make laws as to insurance effected within the limits of a colony by that colony.

So it was where the insurance was effected that was reflective of that ‑ ‑ ‑

CALLINAN J:   Rather something like a proper law of the contract sort of concept in a way.  You look at where the contract was made.

MR MITCHELL:   We would say where the contract is entered into regardless of what the proper law of the contract might be.  So if a contract is entered into in Western Australia between a State and an insured, it would remain State insurance within the limits of the State even if the contract identified the proper law of the contract as a law of New South Wales.

GLEESON CJ:   It turns on where you write the business?

MR MITCHELL:   Yes.  That, again in the age of the internet, may need some qualification as to where that is.

GLEESON CJ:   Exactly.  I thought we had a case about this recently.

HAYNE J:   AssetInsure.  Can I just take you back to these questions about 109 and take you back not only to that subject matter but to the subject matter of characterisation.  The bone is still worrying.  Is there not an impermissible melding of two separate sets of ideas underpinning the arguments that are advanced in this case?  First, the question of characterisation is a question of power that requires consideration in the traditional fashion of the rights, liabilities, et cetera, created – see Fairfax, see Banking.  So far, so good.

MR MITCHELL:   Yes, your Honour.

HAYNE J: The practical consequence to which Victoria points in this case is a practical consequence of the application of 109, but when you identify the field that is covered by the relevant Commonwealth legislation, there is a consequential invalidity of various provisions among which there is a pro tanto reading down of section 7 of the Insurance Act as a consequence of the identification of the field covered by the relevant federal law, namely, the field identified as liability of certain corporate employers to their workers. It is only when you throw together covering the field test back up into a question of characterisation that you get the conclusion that this is a law with respect to insurance or, as you would have to have it, law with respect to State insurance. Why, as the consequence of 109, is a particular compulsive form of State regulation concerning insurance is pro tanto invalid? That is the nature of the problem that is worrying me, Mr Mitchell.

MR MITCHELL:   Yes.

HAYNE J:   Here is the chance to answer it.

MR MITCHELL:   We would have characterised section 108A(7)(a) in a somewhat different manner, as providing directly that State workers’

compensation including section 7 of the State Insurance Act did not apply to a licensee. Section 109 then operates upon that, in a sense, direct inconsistency rather than covering the field inconsistency. If the provision is construed in that manner, then it can be characterised as a law with respect to insurance in that aspect of its operation and one then gets to the point where the argument between the parties begins. If section 108A(7) does not have that effect, then the field which is covered by the Commonwealth Act would seem to be the liability of an employer to its employees in respect of workers’ compensation and common law liability rather than the field of insurance in respect of that liability.

Your Honour, finally in relation to the example which your Honour the Chief Justice gave of the law providing for the reserves and how that might apply to a State insurer, the phrase “State insurance extending beyond the limits of the State concerned” is not part of the limitation of Commonwealth power, it is part of the second limb of section 51(xiv) which grants that power. So that to be valid, a law about reserves applying to a State insurer would need to be able to be characterised as a law with respect to State insurance extending beyond limits of the State concerned, and a law which simply dealt with reserves may be difficult to be characterised in that manner. If it please the Court, those are my submissions.

GLEESON CJ:   Thank you, Mr Mitchell.  Mr Leeming.

MR LEEMING:   May it please the Court.  Might I address three matters?  First of all, the precise operation of 108A, the very point that has been the subject of extended debate already this morning ‑ ‑ ‑

GUMMOW J:   It seems to be the nub of the case.

MR LEEMING:   Indeed.

HAYNE J:   It is day two, therefore it is another ‑ ‑ ‑

GUMMOW J:   Somewhat disguised, but there it is.

MR LEEMING:   The nub is not getting any blunter; it is getting sharper.

GUMMOW J:   Yes, but it is not a point that arose in Bourke.

MR LEEMING:   Quite so.  In particular, what I wish to do is to draw the Court’s attention to the operation of section 45 of the Commonwealth Act and the qualified immunity that is given by 44; secondly, I wish to say something that one can get from the text in 51(xiv), the proviso; and thirdly, I wish to say something about what was said in Bourke which does not arise on the facts of this case but does arise in New South Wales, the notion of “controlled by the State”, principally not because I am forced to because of the way New South Wales has regulated its workers’ compensation regime but principally because, in our submission, that is the key to identifying the error in the reasons of the primary judge. 

To come to the primary submission, the nub of the matter, Mr Hanks has already addressed on the common law liability of employers that continues notwithstanding the efficacy of section 108A(7) because 108A(7) only purports to render inapplicable laws of a State or Territory.  There is a question over the ambit of the words “relating to workers compensation”.  Does that include, for example, statutory contributory negligence legislation, for example?  Maybe that does not relate to workers’ compensation in the same way that the modifications to common law that are seen in Victorian and New South Wales legislation do, but even so the employer who becomes licensed under this regime is still, as Mr Hanks says, liable at common law to some extent. 

We know that section 44 is not wholly effective:  see Georgiadis.  We know that there are further very difficult questions that arise in relation to its operation, say in relation to Optus, as Mr Hanks referred to.  But can I also add that 44 is itself qualified by its opening words “Subject to section 45” and section 45 permits an employee to elect in writing to pursue the employer for non‑economic loss:  see 45(1).  There are qualifications that common law right, in particular that in 45(4).  Non‑economic loss capped at $110,000, a point made by Justice Selway in his reasons.  But all I wish to observe from that is that that is perhaps the clearest way of observing that on any view this Commonwealth Act does not, contrary to some of the examples that have been debated about the Commonwealth laws that abrogate all forms of liability – this is not one of those law.  This is a law which abrogates liability in part and preserves, to some extent, common law liability of employers.

What lies behind that is that when one then addresses that state of affairs to section 7, section 7 is an obligation in State law upon employers not just to put in place certain insurance with respect to State compensation liabilities but also with respect to common law:

must obtain and keep in force a WorkCover insurance policy with the Authority in respect of all of the employer’s liability under the Accident Compensation Act 1985 and at common law –

Section 155 in New South Wales is in exactly the same terms. So that, in order for this legislation to achieve its purpose, it is not sufficient for it merely to render inapplicable the State laws giving rise to employer liability. It must do more than that otherwise there will still be an extant obligation in section 7. The law must directly set aside that obligation to insure against at least common law liability, and I adopt what Mr Mitchell said, therefore this is a case of direct inconsistency and one does not need to get into questions of the field. There is that necessary link and it is not a case that can be dealt with merely by saying, “This is a Commonwealth law that gets rids of liability”. It needs to do more than that to achieve its purpose. That does not answer all the questions that have been debated but ‑ ‑ ‑

HAYNE J:   Can I just understand where you have got to at this point of the development?

MR LEEMING:   Yes.

HAYNE J:   First, with 108A(7)(a), do you read that, do you say as – the words “relating to workers compensation”, how widely do you say that expression should be read?

MR LEEMING:   It should be read – and on this point, perhaps only on this point, I am in furious agreement with the Commonwealth – it extends on its natural meaning to also the State obligation to insure against common law liability.

GUMMOW J: Through section 7?

MR LEEMING: Section 7, yes. Undoubtedly, as Mr Hanks said, if it extends to the State‑created workers compensation’ liability, undoubtedly – slightly less arguably but still plainly the better view is that it extends to modifications to the common law: serious injury, caps, that sort of thing. Those are State laws which relate to liability. But if it did not extend to section 7, the obligation to insure, if it did not extend directly, then it would fail in its evident purpose, because this is not a Commonwealth legislation that abrogates all liability. It preserves, although in a qualified way, common law liability, so that the State obligation in section 7 still has force and needs to be cut down in order for the Commonwealth law to be given effect.

GUMMOW J:   In order for 44 and 45 to work?

MR LEEMING:   Sections 44 and 45 would work, and that is confirmed by 108A(1)(c) because, as Mr Hanks said, that liability has shifted from Comcare to the licensee, so that that form of liability, including the election on the part of the employee to obtain common law rights capped at $110,000, that is still there, and that common law obligation therefore would still be something the subject of the section 7 compulsion.

GUMMOW J:   Looking at 108A(1)(c), do you read that as exhaustive?

MR LEEMING:   I read it primarily as directional.

GUMMOW J:   Is liable to pay only under this Act.

MR LEEMING:   But “under this Act” must be read as including what is contemplated by 44 and 45, so, yes.

GUMMOW J:   Yes.

HAYNE J:   Just so.  But there are two steps there, are there not?  First, 45 is necessarily inconsistent with the Victorian capping regime, is it not?

MR LEEMING:   Yes, indeed.

HAYNE J:   And there is a 109 worked, of course, in respect of that.

MR LEEMING:   Absolutely.

HAYNE J:   But 108A(1)(c), if read as the licensee is liable to pay in effect only in accordance with this Act ‑ ‑ ‑

MR LEEMING:   Let that be assumed.  Even so, the Victorian obligation to insure continues to bite and one just returns to the words of the State legislation:

must obtain and keep in force a WorkCover insurance policy with the Authority in respect of all of the employer’s liability under the Accident Compensation Act 1985 and at common law or otherwise –

In my submission, the natural reading of that is to include liability at common law as including the modified 45 election liability at common law that an employer still faces as well as what is not ‑ ‑ ‑

GUMMOW J:   The words are “common law or otherwise”.

MR LEEMING:   Quite so. The New South Wales legislation is even more broadly drafted as it matters, but section 7 is what matters in this appeal and, although the reasoning is complicated, 45 as well as the not complete effectiveness of section 44, in my submission, demonstrates that there is this direct attack on the thing that we have been arguing about: the compulsory obligation in section 7.

GUMMOW J:   Looking at 108(1)(c), you have said what you say about that and you say that would still leave with some work to do the obligation under the State Act to insure because it would be the modified common law.

MR LEEMING:   Yes.

GUMMOW J:   That on its face would not be inconsistent with 108(1)(c) plus 44 plus 45, is that right?

MR LEEMING:   That is right, yes.

GUMMOW J:   Then what is the next step?

MR LEEMING:   The primary goal is twofold.  First of all, to explore at the level of detail what in fact is the operation of this impugned provision, but secondly, to ‑ ‑ ‑

GUMMOW J:   What, 108A(7)(a)?

MR LEEMING:   Quite so.  What are the State laws that are rendered inapplicable because they relate to workers’ compensation?  I say as a matter of construction that includes the compulsory insurance because of the absurd result.

GUMMOW J:   Because otherwise section 7 would be left.

MR LEEMING:   Exactly, and you would have this silly compulsory obligation to insure against the common law rights that were left, and plainly the Commonwealth intention is to eliminate all of that entirely.

HAYNE J:   Pausing at that point, the observation or perhaps contention that section 7 otherwise would be left is one that in part depends upon the way in which the Accident Compensation Act itself is to be understood in its references to employers when, given the way in which it is drafted, you have such provisions as Part IV, section 80 and following, which cut down what otherwise would appear to be a perfectly general reach.

MR LEEMING:   Yes, I accept there is a question of State statutory construction within what I have said which I have not developed.  I accept that completely.

HAYNE J:   But also there is a point of intersection between federal and State law, is there not?  Yes, of course you have to construe the Victorian Act, a task which you are leaving to us, thank you so much, Mr Leeming, but does the federal Act intersect in a way that would otherwise take out or cut down the apparent generality of 7?  That is the bottom line.

MR LEEMING:   Yes, it is.

HAYNE J:   Your premise is 7(1) is left otherwise intact but for 108A(7)(a), is that right?

MR LEEMING:   Yes, indeed.

HAYNE J:   It is that premise which I think may have to be just examined and blown out of it.

MR LEEMING:  I do not apprehend it is an issue between the parties, but ‑ ‑ ‑

GUMMOW J:   That does not make us comfortable, Mr Leeming.

MR LEEMING: I accept that. At the end of the day what I am invoking is notions of evident intent and capricious results if the contention which I have put forward were not the true construction of the legislation. That is not entirely satisfactory, of course, but one would expect words like those in section 7 to be construed broadly. The expansion to add common law in the words “or otherwise” confirm that. One also adds to that the beneficial construction that one would give that this is classic beneficial legislation if ever there was any. That is the answer I have ‑ ‑ ‑

HAYNE J:   You then have 7(1AA)(a) and (b) which are not engaged, I would have thought, not said to engage.

MR LEEMING:   Yes, your Honour.

HAYNE J:   But the drafting of the ACA has been the subject of much comment in the Court of Appeal of Victoria, I will not add to it.

MR LEEMING:   Yes. 

GUMMOW J:   But where does that leave us then?

MR LEEMING:   It leaves us with a situation where, in my submission ‑ ‑ ‑

GUMMOW J:   On a construction you give of 7 ‑ ‑ ‑

MR LEEMING:   This appeal cannot be resolved on the basis that, does a Commonwealth law that merely kills liability, that might be destructive of the Government Insurance Office’s business, it is not one of those laws because it is, on the construction which I have elaborated, directly attacking the obligation to insure.  It cannot be dealt with in an example.  It is a case of direct – the consequence that the States are seeking to avoid, the constitutional consequence the States are seeking to avoid, is not one of inconsistencies through covering the field.  It is direct inconsistency.  The fact that it is that directness lends perhaps some support to the notion that State insurance extends to this compulsion as well, some slight…..but that is as far as I can put that. 

I am conscious I have not answered – this is the question in the appeal.  That is the contribution I wish to make in relation to that.  If I can turn to the second point and that is to try to extract something.  It is not unrelated to the first.  Everything is related to the first point, but I wish to extract something from the words of the proviso in 51(xiv) and (xiii) other than “State insurance”.

Perhaps I am attacking a corpse.  If there is anything left in the DOGS Case it certainly should not apply to these heads of power because the point I wish to make is that the proviso which must be given some worth, this is a qualified grant of power, the qualification is one intended to, expressly, enhance State power.  That must be what “other than State banking” does.

So this is not a section 92 prohibition that leaves immune from regulation some subject matters to the extent that the qualification upon the grant has force.  It is enhancing the State power which is recognised there and so if there is anything left in the DOGS Case, and we adopt what Solicitor‑General for Victoria said about what has been said subsequently about that, but it has no application to a Commonwealth restriction on power such as that in 51(xiv) whose correlative effect is to enhance that power rather than simply to subtract from the totality of legislative power that exists.

KIRBY J:   Is that a correct analysis, though, because is it actually enhancing the State’s power?  It is simply preserving part of a power which is being divided up partly given to the Federal Parliament, partly left with the State Parliaments.

MR LEEMING:   Your Honour is right.  Precisely, of course, the State had that power beforehand and it has plenary power afterwards and I am using “enhancing” in a ‑ ‑ ‑

KIRBY J:   The history of the 20th century was that it continued to exercise an awful lot of power on insurance, at least in the insurance contracts area, until 1984.

MR LEEMING:   Very recently in New South Wales but I am using “enhancing” perhaps in a more practical sense.  Yes, of course the power is there but its effective exercise unqualified by Commonwealth legislative intrusion is what is enhanced and what is plainly intended to have been enhanced by that qualified grant of power so that the rationale expressed by Justice Mason reading down prohibitions simply does not have application where is there is a correlative enhancement as one sees in these two heads of power.

KIRBY J:   But anyway the whole business of reading it down is really heavily biased in favour of federal power and I just do not see how a court discharging its obligations neutrally can take that biased attitude.  It just has to give all of the words meaning as I think Justice Gibbs said.

MR LEEMING:   We agree.  Yes, your Honour.  Lastly, in Bourke the whole Court referred not merely to insurers that were owned by States but also those who were controlled by States and the textual platform for this submission is that 51(xiv) refers not to State insurers but State insurance.  I want to give some little force to the notion recognised by this Court in Bourke to control by reference briefly to the situation in New South Wales and I think your Honours have a bundle of extracts from the Workers’ Compensation Act.  That was distributed, I think, last week.  The position in New South Wales is, except for one thing, on all fours with Victoria; workers’ compensation is compulsory, the State sets the premiums, the State sets the terms, the States set the payouts either through statutory compensation or modified common law and the difference is that there is a provision for licensing insurers who engage in this business, none of which is the State.  There are three categories; self insurers, specialised insurers, but the main one is that referred to ‑ ‑ ‑

GUMMOW J:   Do you want to say the licences are controlled?

MR LEEMING:   I wish to say more than that but certainly in part that.  The main one is the nominal insurer which has its own particular peculiarities which I should draw the Court’s attention to briefly.

It is what is established in 154A.  I am not sure if your Honours have the handout or the reprint.  Section 154A establishes the workers’ compensation nominal insurer and 154A(3) makes the position quite different from Victoria because it is not and does not represent the State or any authority of the State.

KIRBY J:   Why was that put in?  Just in case the State had to pick up a tab some time.

MR LEEMING:   One infers that it is for accounting reasons.  One infers that from a provision in the ‑ ‑ ‑

GLEESON CJ:   You mean its off-balance sheet?

MR LEEMING:   Its off-balance sheet.  It is expressed to be off-balance sheet in the Public Finance and Audit Act, section 63F.  Notwithstanding that, the provisions ‑ ‑ ‑

GUMMOW J:   This is the approbation after the reprobation.

MR LEEMING:   As your Honours can see, in 154B(1) it “is taken to be a licensed insurer” and in (5) its liabilities are only satisfiable from the fund.  Section 154C(1) explains that the authority, that is the workers’ compensation authority, which is undoubtedly the State, acts for it and 154C(1) is a statutory authority, authorisation of the authority so to act.  These are 70 per cent, as I am instructed, of the employers in New South Wales who are insured with the nominal insurer.  Those policies, the premiums go in and the payments come out of the Workers Compensation Insurance Fund in 154D.  That is the thing that is its off‑balance sheet. 

Your Honours will see in (5) that there is a measure of security in the assets of that fund.  There are no dividends, it is not subject to income tax, there is no notional income tax, on my instructions, that your Honours were raising this morning.  Peculiarly, in 154D(6) all of the insurer, the authority, the State and any State authority have no beneficial interest in the fund, they do not have any liability and are not trustees of it.  That, coupled with the provision in the Public Finance and Audit Act are what ensure that it is off‑balance sheet but also the provisions of this Act ensure that that fund is there for the purpose of collecting premiums and paying out liabilities.

It is a peculiar situation where something which is expressed not to be the State, 154A(3), nonetheless is the insurer for the majority of workers’ compensation policies and is still controlled in the way that I have indicated by the State.  The underlying policies of insurance premiums, payouts, are all determined by the State as well.  We say of course that falls within State insurance.  It is not a question that need of course be resolved in this appeal but the reason I go to it is that when Justice Selway – we have set this out in the written submissions – reasoned in relation to Victoria that the proviso had no protective effect, his reasoning was, it seems to us, largely based upon the proposition that it was necessarily confined in its operation to State insurers, and particularly in paragraph 63 where he said:

What is protected by the proviso is the decision by the Victorian government about whether and how it will carry on an insurance business –

that then feeds in in his reasons.  We say that premise is unduly narrow.  The New South Wales structure perhaps illustrative only that indicates that

one can have State insurance that is not conducted by – whose insurer is not the State. If that is so – and we say it is – then that approach that he adopted there is unduly narrow in assessing whether or not one is within or without the proviso. It does not give weight to what the Constitution protects, which is not State insurers but State insurants. May it please the Court, those are the submissions I would wish to make.

GUMMOW J:   Do not go away.  Can you just go back to your first point for a second?

MR LEEMING:   Yes, your Honour.

GUMMOW J:   Looking at 108A(7) again for a minute, and giving it the construction you have given, in its operation with respect to Optus, what is the head of power that supports – federal power that supports that?

MR LEEMING:   Difficult questions – 108A(7), it is difficult to see.  No doubt the corporations power is relied upon.  No doubt that is subject to the restrictions in 51(xiv).

GUMMOW J:   But is it itself then a federal law with respect to insurance?  You say it produces this direct inconsistency.

MR LEEMING:   Can I add to my previous answer?  Yes, it does follow from what I say that it would be a federal law with respect to – arguably a federal law with respect to insurance.

GUMMOW J:   And maybe also with respect to corporations.

MR LEEMING:   Maybe too but, as Mr Hanks said, that characterisation does not arise because of the way these proceedings have arisen and the common ground that the qualification applies irrespective ‑ ‑ ‑

GUMMOW J:   You do not have common ground in constitutional cases, Mr Leeming, you know that.

MR LEEMING:   The fact that this Court accepts that the qualification in 51(xiv) cannot be evaded through some other head of power.  You are right, it is not a question of common ground, your Honour, of course.  If it please the Court.

GLEESON CJ:   Mr Solicitor for South Australia.

MR KOURAKIS:   If the Court pleases, can I first make a submission about the characterisation of a law that imposes an obligation to insure.  In my submission, the validity of such a law as a law with respect to insurance or State insurance does not depend on determining one way or another whether compulsory insurance falls within the description “insurance”.  It is valid simply because it is a law that imposes certain duties on that class of socio‑economic activity that can be described as insurance, just as a law that prohibits the taking out of or insuring against certain risks is a law that imposes a duty on that class, even though the very effect of the law means that no insurance or contract of indemnity will come into being.

Your Honours, in my submission, it is rightly accepted in this case that State insurance is the conduct of insurance business by a State agency.  If that is the case, then the word “insurance” as it appears in the primary grant of power to the Commonwealth and then also in the expression “State insurance”, must bear the same meaning.  It follows if the Commonwealth can in its primary grant require the insurance of certain risks and that that is a law with respect to insurance, similarly it would be a law with respect to State insurance to require persons to insure with a State insurance agency.  So the character of any such law, that is, one that requires persons to insure with a State insurance agency, is a law with respect to State insurance.

Your Honours, it follows from that that any law qualifying that absolute obligation, giving a power to exempt a person or corporation from that obligation, must also operate on that same field of activity, and even more radically a law that repealed the obligation altogether must nonetheless still operate on that same field of activity.  So in this case, although the Commonwealth law simply gives a choice or a privilege, if you like, to corporations that were bound under the State law, the character of that law is nonetheless the law with respect to State insurance.  Your Honours, it is completely irrelevant to that ‑ ‑ ‑

KIRBY J:   Could I just ask does that need some refinement or reconsideration in the light of Mr Leeming’s point which I had not earlier noticed so clearly that the paragraph in the Constitution refers not to insurer but to insurance? It is therefore, in a sense, addressed conceptually to the activity and business as distinct from who does it.

MR KOURAKIS:   I think Mr Mitchell also addressed that point.  Your Honour, “insurance” in 51(xiv) can and does include simply that relationship of indemnity but there is no reason why it should not also include the business of writing insurance ‑ ‑ ‑

CALLINAN J:   Not merely by a State insurer.

MR KOURAKIS:   No.

CALLINAN J:   That is, the State as the insurer.

MR KOURAKIS:   No, in terms of insurance generally.  Now, your Honours, for the purposes of characterisation it is simply completely irrelevant which legislature has enacted the obligation and which legislature modifies it or repeals it.  The characterisation of the law is one that is undertaken without regard to the particular legislature that has made it. 

Now, your Honours, can I next make a submission about the approach to 51(xiv) that could be taken and that is seeing it as a compound conception, that is, as a Commonwealth power to make laws with respect to the compound conception which is insurance other than State insurance extending beyond the State concerned.  I might call that compound conception just “private insurance”.  It does not adequately describe all its aspects but can I just call it private insurance?  If that approach is adopted, your Honours, in my submission, no different result should occur in this case, that is, the Commonwealth law would not be characterised as a law with respect to private insurance and I will come to why I say that in just a moment.

Before I do can I just make some observations about some difficulties that would exist in approaching 51(xiv) in that way?  If 51(xiv) is seen simply as a grant to make laws with respect to private insurance, if one was to adopt the Bourke‑style approach and ask what then is extracted or abstracted from the other Commonwealth powers, the answer would be only the power to make laws with respect to private insurance.  That would leave in place in the other powers a power to make law with respect to State insurance and that result, of course, would be completely contrary to Bourke because Bourke recognised with respect to the banking power that the corporations power could not be used to impose an obligation on a State bank. 

In short, your Honours, the compound conception approach just does not allow any theoretical basis upon which the proviso in (xiii) or (xiv) can be applied to the other powers and therefore would simply destroy the very purpose of the proviso which was to allow, is to allow State agencies to conduct their insurance business as they see fit. 

Your Honours, put in another way, it is our submission that “State insurance”, appearing as it does between the commas in section 51(xiv), is in fact an abstraction of power rather than simply an abstraction of subject matter from the more general class of insurance and if it is not seen as an abstraction of power then it would simply not achieve that purpose which is evidenced from both the text and history, the purpose to which I have already referred. The result would be that the Commonwealth could, through the corporations power or other powers, control the way in which State agencies conducted their insurance business.

Your Honours, there is only one qualification to the submission I make about the operation of the proviso against the other Commonwealth powers and that is, of course, that all of the placita must be read together and it may well be that the text and subject matter of some other placita mean that the proviso in 51(xiv) will not apply there, just as, for example, it can be said that the proviso in 51(xiii) would not be applied in the currency and bills of exchange powers in a banking situation.

Your Honours, finally on the general difficulty in applying the compound conception approach, can I say this, that if it was to be applied, to give effect to the proviso one would not merely ask, is this a law with respect to private insurance?  One must ask is this a law which in all of its applications is, with respect, a private insurance because, for example, a law that was general in form and said all insurers must write business in this way would apply to both private insurers and State insurance agencies.  In its latter application it would clearly contravene the proviso and, as I say, one can meet that by asking the question, if one wanted to adopt the compound conception approach, simply, is the law in all of its applications a law with respect to private insurance?

Your Honours, can I come to why, in any event, in this case this law, the Commonwealth law, 108A(7) could not be characterised as the law with respect to private insurance in any event.  There has been much discussion of the idea of self insurance which is behind the idea of the exemption in the Commonwealth Act.  All that the Commonwealth Act does is relieve the corporation of the obligation to insure with the State insurance agency leaving it to that corporation to decide whether it insures that – this is if it is to have valid application, of course – leaving it to the corporation to decide whether it self insures, that is, not insures at all, or whether it insures with a private agency.  That effect on private insurers, if you like, or in the field of private insurance is purely economic and only very weakly economic at that given that the evident purpose of the legislation is to exempt only those corporations that can meet their own liabilities without further insurance.

Your Honours, can I just attempt to apply some of the general propositions I have made to the paragraph containing Justice Selway’s ultimate reasoning, paragraph 69 of his judgment.  Can I go first to subparagraph (a).  Your Honours, in our submission, contrary to what his Honour Justice Selway thought was clear from Bourke, Bourke did not reject a test based on whether the law was with respect to State banking.  Rather, the Court in Bourke rejected the tests of sole characterisation and pith and substance, tests that would have been based and applicable only if 51(xiii) was seen as a grant of two mutually exclusive powers, one to the Commonwealth to make laws with respect to insurance and one to the States to makes laws with respect to State insurance.

That is all that was rejected in Bourke.  They rejected the pith and substance type of characterisation test.  The Court in Bourke itself applied the “with respect to” test at a number of points in the course of its judgment.  Indeed, it described the “with respect to” test as another way of expressing the “touch and concern” test that it had referred to.

KIRBY J:   When you look at Justice Kitto’s explanation of the “with respect to” he also refers to substance and uses words that do not seem all that different from the Canadian pith and substance test.  We are all struggling to find a way to say that it is really and truly in our judgment connected with the subject matter or relating to the subject matter. 

MR KOURAKIS:   Some submissions and judgments perhaps come to that, your Honour, but ultimately now it is simply a matter of identifying whether the rights and duties imposed operate on a class of activity that is the subject matter of the placitum.

GUMMOW J:   What do you say about paragraphs 70, 71 and 72 of Justice Selway’s reasons?

MR KOURAKIS:   There are a number of ideas in those.  Can I perhaps say something about the expansion/contraction idea which is in 71, 72.  The Commonwealth power is not reduced by what a State does.  A State insurance agency without the assistance of any legislation might decide not to do life assurance.  The Commonwealth’s power as to life assurance could be said to be then extensive; it can regulate all life assurance business in Australia.  If a State insurance agency then, as it can, simply writes that business, the practical effect is that the Commonwealth no longer controls and regulates all life assurance done in Australia but its power has not changed.

Your Honours, it does not matter whether the insurance agency attracts that business and does that business because it offers really good premiums, cheap premiums, or very good security, or whether it attracts that or has that business because of a legislative command.  If one is considering the question or the problem caused by an idea of contraction and expansion of Commonwealth power it is no different in either of those cases and that suggests, really, the power is constant, that the practical effect changes as the State insurance agency does more work either because it attracts it or because of a legislative command.

As to 70 which speaks about State insurance operating in a commercial market or in the market there is simply no textual basis for that and if one accepts that power to make laws with respect to insurance includes the power to make ‑ ‑ ‑

GUMMOW J:   I was thinking about line 10 of paragraph 70:

It is clear from the mischief to which the proviso was directed -

What do you say about that? That does seem to be so, does it not?

MR KOURAKIS:   Your Honours, the mischief was – one looks at the purpose of the provision as a whole.  The concern to which it is directed is to have national regulation of insurers largely because of the excesses of private insurers.  In that context, it was decided to exempt State insurers ‑ ‑ ‑

GUMMOW J:   There have been some rather unpleasant experiences in your State, if I may say so, in the last 20 years.

MR KOURAKIS:   Not only ours.  But, if your Honour pleases, that precisely makes the point because when it is a State insurance agency that has those excesses, there is a political consequence as happened in our State and as happened in Victoria.  Your Honours, the reason for the exclusion ‑ ‑ ‑

GUMMOW J:   You make it a domestic rather than a national political responsibility.  That is the question.  How does that fit in with the constitutional scheme?

MR KOURAKIS: The further grant of power shows how the Constitution fixes the balance in the federal scheme. The further grant of power is to the Commonwealth to regulate insurance “extending beyond the limits of the State concerned”, and that indeed is a balance that was referred to in the debate. So overall the purpose and mischief still fit within a – there is some reason to the balance that we say the section affects.

Now, your Honours, there was a further point arising from that that has eluded me for now, but can I just return to 69(b) in the reasons of his Honour Justice Selway.  As to the first part of that paragraph, in my submission, posing the test is it a law with respect to State banking does not require a reading down of the words of the other placita at all.  The word “insurance” can still be read widely, just as the other words of other placita can still be read widely.  The proviso is simply a limitation though that delineates the extent of what would otherwise have been the concurrent State and Commonwealth power.

In that paragraph (b) his Honour also refers to what is at first sight the surprising result that the State might be able to exclude the operation of Commonwealth laws on insurance in that State altogether by creating a statutory monopoly.  Now, your Honours, that result might be a reason for revisiting the reasoning that led to the result, but of course does not in itself disprove it if that reasoning is sound, and I have made my submissions, as the other States, on why a law making insurance compulsory or State insurance compulsory is a law with respect to State insurance.

But can I say that the result, in any event, is not completely inconsistent, for the reasons that I have just given in answer to your Honour Justice Gummow and that are put in paragraph 44 of our written submissions.  It remains consistent with an idea of the federal balance that led to the enactment at ‑ ‑ ‑

GUMMOW J:   Federal balance?

MR KOURAKIS:   Well, it is consistent with the purpose as evident from 51(xiv) itself.  Your Honours, in any event, can I make this submission - and this is the other answer I was going to make to your Honour Justice Gummow.  With the integration of insurance business and banking business nationally and internationally, the capacity of the States to reduce the influence of the Commonwealth is itself much reduced because, insofar as the State provides insurance extending beyond it, then of course it is subject to regulation.

Although this factual question did not arise in this case and it is not before your Honours, in the case of both Optus and Toll, one would have to question and wonder whether in any practical way that business could be written by a State insurance agency without it engaging in business extending beyond the limits of its State and to that extent, of course, it would be subject to control.

The questions of reserves raised by your Honour the Chief Justice are difficult, of course, but there is no reason why reserves cannot be calculated by and with reference to the quantum of the interstate business that is affected, and indeed even quarantined from the assets available to meet liabilities elsewhere.

Your Honours, can I also say that arguably, even recognising the Commonwealth’s inability to effect a State legislative monopoly, the Commonwealth may arguably be able to legislate requiring persons to insure with a private insurer even though the State law requires those same persons to insure with the State agency.  Both laws could validly operate, although neither could in a sense abrogate the effect of the other entities’ laws.  A situation in short very similar to that which prevailed in the Income Tax Cases would arise and a political solution reached by the legislatures would be the answer.

Your Honours, can I turn to paragraph (c) then and simply make this submission, that Bourke, we accept, dealt with the application of the proviso and not just its construction.  The approach that Bourke took was to look at legislation, for example, section 52 in that case of the Trade Practices Act, and ask, even though it is in its general form a law with respect to corporations, is it nonetheless in some aspects a law with respect to insurance and then ultimately a law with respect to State insurance?  Insofar as it is a law with respect to State banking in Bourke, it was invalid because it contravened the proviso.

Your Honours, in our submission, the same result can be more efficiently achieved simply by recognising that the proviso acts as a qualification directly on other powers rather than going through what appears to be that convoluted process of extracting a power into 51(xiii) and (xiv) and then applying the proviso to it.  There is no reason, in our submission, why it cannot simply be applied directly.

GUMMOW J:   Do you have any submissions on the construction of 108A(7)?

MR KOURAKIS:   Yes.  Essentially we adopt the submissions made by Mr Leeming and that is that even if it be accepted ‑ ‑ ‑

GUMMOW J:   He escaped before I could put this to him.

MR KOURAKIS:   The first submission we – and I am sure your Honour will ‑ ‑ ‑

HAYNE J:   You are not going to be immune, Mr Solicitor.

GUMMOW J:   I just wanted to ask you this.  What is the force of the word “after” in line 4 of (7), then the force of the word “such” in the second line of (a) and then the force of the word “before” in the second‑last line of (b)?  Is this not a transitional provision of some sort?

HAYNE J:   Is it not marking out a temporal limit to the field?  Before you answer it, Mr Solicitor, it is allied with the question:  what would be left of the relevant Victorian provisions following the application of 109 even without 108A(7)?  Is 108A(7) doing more than marking the temporal limits or reinforcing them?

MR KOURAKIS:   Your Honour, assume that the Commonwealth Act simply removes the underlying liability; assume, as I think must be necessary to answer your Honour’s question, that the Victorian Act nonetheless applies to require the corporation to insure its liability under ‑ ‑ ‑

HAYNE J:   That is the assumption that I am putting in issue with you.

MR KOURAKIS: The assumption that the Victorian Act on its own terms applies or whether it is inoperable because of section 109?

HAYNE J:   Following the application of 109 by reference to the provisions of the federal Act other than 108A(7).

MR KOURAKIS: Yes. Your Honour, that nonetheless requires the assumption that on its terms, and 109 aside for the moment, section 7 of the Accident Compensation (WorkCover Insurance) Act extends to requiring Optus and Toll to insure their liabilities under the Commonwealth Act with it.  So yes, accepting those assumptions firstly, one then asks:  is the removal of the underlying liability under the Accident Compensation Act (Vic), in effect, a covering of the entire field, including the obligation that section 7 would otherwise impose to insure the liabilities under the Commonwealth Act?

I say about that there are two questions. The first is a question of construction of the Commonwealth legislation and whether it intended to cover the field. Assume by implication or even expressly that it had intended to cover the field in the sense of providing that section 7 would not oblige a corporation to insure its Commonwealth liabilities with the State insurance agency. Assume that is the effect of the statute. The answer is in that effect in that application, the statute is necessarily invalid because it is a law with respect to State insurance for the reasons that we have advanced earlier and therefore 109 ‑ ‑ ‑

GUMMOW J:   It becomes harder to say that, I think.

MR KOURAKIS: To say that it is invalid because it is a law with respect to State insurance? Well, your Honour, it is towards the end of the day and it probably does not need to be said again. But, your Honours, the submission I make, and it is, with respect, important, is that it is not 109 that trumps the proviso in 51(xiv). 109 operates on a right imposed and found, or an obligation found, in Commonwealth legislation. Now, whether that right or obligation in Commonwealth legislation is validly there or not is a question of power to be determined by the application of the proviso. If it is there then yes, section 109 might give it an operation that covers the field but the first question must always be one of power. If the Court pleases.

GLEESON CJ:   Solicitor for the Commonwealth.

MR BENNETT:   If your Honour pleases, I propose to address before Mr Star on behalf of the respondents for whom he appears.  Your Honours, I adopt everything in the Commonwealth’s written submissions and I do not propose to repeat those matters.

HAYNE J:   Then you adopt, do you, that this is a law with respect to insurance?

MR BENNETT:   Yes, your Honour. Yes, I accept that.  There are 13 matters which ‑ ‑ ‑

HAYNE J:   And only a law with respect to insurance?

MR BENNETT:   No, your Honour.  Dealing with section 108A(7)(a) was the thirteenth of the 13 matters I propose to deal with because I need to deal with a number of other more general matters first.  But we would say it is a law under a number of powers.  It is under the powers which relate to the individual entities which in relation to Optus might be the telecommunications power.  It is a law with respect to corporations and it is also a law with respect to insurance and thus covered by the Bourke rule and we say it is not a law which touches or concerns State insurance for reasons I will be taking your Honours to.

I will not list in advance the 13 matters I am going to deal with unless your Honours wish me to do so.  I will just number them as I go for your Honours’ convenience.  The first matter to note is that the Victorian Act, the thin Act, establishes or purports to establish a monopoly.  May I just show your Honours two sections of the Accident Compensation (WorkCover Insurance) Act which my learned friends have coyly not taken your Honours to.  The first is section 10 which provides that:

A person, other than the Authority, must not issue or renew a WorkCover insurance policy or a purported WorkCover insurance policy.

That is defined by section 3 as:

an insurance policy issued in accordance with this Act –

not “an insurance policy issued under this Act” but one which – and we would submit it is quite clear in its context, although there may be a small ambiguity, that that is intended to cover any other insurer who issues a policy which covers the liabilities which the Act is concerned with. That is supported by section 7(1)(b), which also has not yet received attention, and that provides that an employer:

must not at any one time keep in force more than one such policy.

“Such policy” is again a WorkCover insurance policy.  So what this Act does is, it does not only say you have to insure; it does not only say you have to insure with WorkCover; it says no one else can offer that insurance and you cannot insure with anyone else.  Now, that has, we submit, when one starts looking at divisions of constitutional power, a very simple effect.

Let me hypothesise for a moment that I was addressing the Canadian or Indian Supreme Court under a Constitution which had headings of federal power and headings of State power, and let me assume for a moment that we had – I will only do this for one minute – a federal power over insurance other than provincial insurance companies and a State power or provincial power over State or provincial insurance companies owned by the State or province. If the State or province were to pass a law saying the State insurer shall have a monopoly and no one else can offer that insurance, that law has nothing to do with the State insurer, it is a law about everyone else. It falls precisely in the federal area. A law saying X has a monopoly is not a law about X; it is a law about everyone else.

Now, let me leave Canada and India and come to Australia.  We know from Bourke that a Commonwealth law enacted under powers which include the insurance power must not touch or concern State insurance.  Now, a law which says, whether Commonwealth or State for that matter, that the State insurer has a monopoly is a law about insurance other than State insurance.  It has nothing to do with State insurance.  It has nothing to do with the State insurer.  It does not give it any rights or obligations.  It does not regulate its rights or obligations in any way.  It is just about everyone else.  It is a law which says everyone else is forbidden from doing something.

KIRBY J:   It is everyone else in relation to State insurance.

MR BENNETT:   No, your Honour.

KIRBY J:   Well, it is the Cheshire cat; it appears and disappears.

MR BENNETT:   It is everyone else generally because what it is saying is no one else can offer insurance.  State insurance is just the company.

GUMMOW J:   Section 10 is a criminal offence directed to everyone else.

MR BENNETT:   Yes, precisely.  So the starting point is that the dismantling of that monopoly is, as classically as anything could be, insurance other than State insurance.  That is what it is about.  It is about everyone else.

GLEESON CJ:   It is about non‑State insurance.

MR BENNETT:   Precisely, your Honour.  It is as simple as that.

KIRBY J:   But that is by reference to what State insurance is, and it does happen to appear in a WorkCover Insurance Act dealing with the incidence of State insurance.

MR BENNETT:   Yes, it is, but it is ‑ ‑ ‑

KIRBY J:   Talk about needles and angels.

MR BENNETT: No, your Honour, it is not. Section 7(1)(b) and section l0(1) are sections which are just not about State insurance at all. They are about every other insurance company. They fit like a glove into our area, not theirs.

CALLINAN J:   What if the Act provided that the State could licence one and one only insurer?

MR BENNETT:   That would not be State insurance, your Honour, and I will come to that.  That is the New South Wales argument, and I will come to that.

CALLINAN J:   Well, if you look at what Justice Fullagar said in Associated Dominions, he defines “insurance”, admittedly talking about Commonwealth insurance power.  He defines it very, very widely and I would have thought would have embraced licensing and restrictions upon entering the field of insurance.

MR BENNETT:   Insurance does, your Honour, but State insurance has a special meaning.  It means an insurance company under the State.

CALLINAN J:   I beg your pardon, it means which?

MR BENNETT:   An insurance company owned by the State, or the State operating as an insurer.  I will come to that, your Honour.

KIRBY J:   I notice the heading of section 10 talks of issue and renewal of WorkCover, ie, State insurance policies.

CALLINAN J:   At any rate, your submission is that State insurance is confined to insurance by the State?

MR BENNETT:   Yes, your Honour.  I will be taking your Honours to extensive authority in this Court about that, in Melbourne Corporation and in Bourke, as well as to the Convention Debates, which make that clear.  That is, we would respectfully submit, received and accepted doctrine, and it is fairly radical to seek, as New South Wales does, to challenge that.  Of course New South Wales seeks to challenge it in a context which is irrelevant to this case.  It is really seeking a declaration from this Court about the validity of its legislation, but I will come to that when I get to the New South Wales argument.

So that is my first point, that insofar as this legislation seeks to impose and create a monopoly, that is exactly what the State cannot do, and for the State to impose a monopoly in favour of its State insurer is to move into the very area which is given to the Commonwealth: “insurance, other than State insurance”. Of course it is an area where there is both State and federal power, but it is an area where under section 109 the Commonwealth can legislate and its legislation will override the State legislation. That is the first matter.

The second matter is the significance of compulsion. One of course has to distinguish compulsion to insure and compulsion to insure with a State insurer. Here we are dealing with compulsion to insure with a State insurer. Section 7(1)(a) says every employer “must obtain and keep in force a WorkCover insurance policy with the Authority”. So there is a compulsion in relation to the State insurer. We say a number of things about that. We submit first that compulsion, the obligation imposed, is not itself insurance; it may be with respect to insurance but it is not insurance. We do not say, as Victoria has attributed to us, or I do not submit now though some of our submissions may suggest it, that compulsory insurance as such is not insurance. The policy or the obligations that result from compulsory insurance are, of course, insurance, but the obligation, the compulsion itself, is not insurance. It is with respect to insurance but not insurance. Similarly, we say in relation to State insurance where the description is touch or concern rather than the wider words “with respect to” we submit it is not State insurance.

What compulsion goes to is the milieu, the industry, the regulation of the industry in which the State insurer is entitled to operate free of federal control, but to say that insurance with it is compulsory and thus, in practice, to take away the insurance of all other people in that milieu, in that industry, is we submit something within the area of insurance other than State insurance. Of course, the practical effect of compulsion is to confer a monopoly. It is true that a person could theoretically choose to, subject to section 7(1)(b), insure with more than one person, but that is a fanciful proposition.

We know that insurance with more than one insurance company is not unlawful.  It produces certain consequences in relation to averaging between the companies and the various doctrines of insurance law and it may have an effect if one fails to disclose it or if one lies about whether it exists, but on its own there is nothing unlawful about it.  But the practical effect of compulsion is clearly to affect the milieu as well as the company itself. 

So we submit that a law which removes compulsion is itself a law with respect to insurance other than State insurance because it is a law which is dealing substantially with the milieu rather than with the policies issued and the regulation of the policies issued by the State insurer.

The third matter I wish to address, and I will address it very briefly, although the learned Solicitor for Victoria did go into it in considerable detail, is the 19th century history in Europe and New Zealand.  I merely want to make a number of very brief points about that.  The first is that much of the activity which is referred to in Europe in the 19th century was concerned not with compulsory workers’ compensation insurance, which was a very small part of it, but with what is generally described as social insurance or national insurance or something of that nature. 

What we submit is that when one talks about social insurance it is not insurance at all.  The word “insurance” is merely being used as a metaphor.  It is a convenient metaphor because it shares some characteristics with insurance, but when one talks about national superannuation schemes or national schemes under which everyone pays a lot of taxation which is returned in old age pensions when one retires with various degrees of specificity in between, to describe that as insurance is simply false.  National insurance is a convenient and easy metaphor but it is nothing more than a metaphor. 

We note also that the table shows that most of what was going on in 19th century Europe was concerned with that type of insurance and we note also it does not seem to have applied to any common law countries.  These were civil law developments.  They are of interest but clearly of less interest, one would have thought.

The third and most important aspect of this is that when one goes to the Convention Debates one sees that the topic, which was dealt with with some passion by a number of the speakers, of social insurance is discussed totally independently of the topic of insurance.  They never discussed it on the same day.  The topic of social insurance was discussed in the context of what ultimately became placitum (xxiii) and to some extent in the context of child welfare provisions.  I will not take your Honours to the relevant pages at the moment, but in Victoria’s first volume at tab 9 your Honours see at page 779 there is a discussion of the insurance placitum, and I will come back to this for other purposes later, and your Honours will notice that Mr O’Connor discusses at some length what occurred in New Zealand in the context of that.  That again I will deal with later.

When one goes to the Commonwealth’s submissions, tabs 2 and 3, your Honours will see extensive discussion at pages from 1082 onwards of the question of invalid and old‑age pensioners.  Mr Howe starts with an intervention on page 1082 saying:

It is a question which has occupied, and is occupying the attention of the foremost statesmen of the world.

At page 1086 Mr Howe talks about the German empire and he talks about how:

In every civilised community we find men who have given their best mental and physical labour to the state becoming, in their declining years, through no fault of their own, a burden to their friends ‑ ‑ ‑

et cetera, and he talks about ‑ ‑ ‑

GLEESON CJ:   Do not make this personal.

MR BENNETT:   I am sorry, your Honour?

GLEESON CJ:   It does not matter.

MR BENNETT:   He goes on to talk about the German empire and how there are 12 million people in Germany subject to the law, and that goes on to 1087.  Further on under tab 3 at page 1992, Mr Howe repeats a lot of this and talks at the bottom of the first column about:

compulsory contribution towards a fund out of which provision would be made for his old age.

Mr Barton discusses in relation to that ‑ ‑ ‑

KIRBY J:   We wonder why you are belabouring this, of old gents going into charitable institutions.

MR BENNETT:   Only to make the point that your Honour made earlier this morning, that in the Convention Debates the topic of insurance and the topic of what one can metaphorically call social insurance were a million miles from each other.  They were discussed separately as separate issues and no one seemed to think of that type of thing as being insurance, and we submit it is not.

GLEESON CJ:   I do not think the distinction was quite as clear‑cut as all that.  The provision of medical and hospital benefits really straddled the area of insurance and welfare.  The origin of the Hospital Contributions Fund was something called the Hospital Saturday Fund when people used to pay sixpence or some amount of money like that every Saturday towards provision for future necessity.  Life insurance companies originally started out as charitable organisations set up to encourage thrift amongst poorer people.

MR BENNETT:   Friendly societies.

KIRBY J:   There were burial funds similarly established.

MR BENNETT:   Yes, but the point I am making is that while they clearly had elements of insurance within the meaning of some sort of dictionary definition, the founders regarded the topics as being quite distinct and dealt with it separately.  The only place where there is any reference suggesting that they have anything to do with each other is in an enigmatic expostulation by Mr Barton at page 1086 in tab 2.  I only deal with this in case your Honours notice it and think that it has some deeper significance.  Your Honours will see in the first column, after one of Mr Howe’s passionate speeches concerning old men who are a burden on their friends, Mr Barton says:

Does not this matter stand in the same category as state banking and state insurance?

Note that he says “state banking and state insurance”.  What he means, we would submit, is simply, ie, a matter as to which there is a State interest and it should be dealt with by the States.  That becomes clear a few pages later, if your Honours go to tab 3 when Mr Barton at page 1992 makes a long speech saying, in effect, it is a matter for the States.  At the bottom of the second column he says:

If we are to pension invalids we may as well take over the treatment of the sick poor generally.  The treatment of the sick poor is in all the provinces, and it has been always, not only a particularly provincial matter, but an intensely local matter.

GLEESON CJ:   There is an ambiguity in the word “state” that is apparent if you look at page 1991 in the left‑hand column.  It is spelt with a small “s” and it says:

It has been contended that state assistance to the aged poor would undermine thrift in the people.  It is said that the people of the province or state, if they knew that, without any individual effort on their part, the state would provide for them –

et cetera.  Sometimes it might just mean the government.

MR BENNETT:   Yes.  In that context it does, but it is clear that Mr Barton is opposed to – and at 1994 he says in the middle of the first column:

I cannot conceive how you can apply a good old-age pension law to a migratory population like that we have in Australia.  What are you to do with a man who spends one-third of his time in Queensland, another third in Victoria, and the remaining third in Western Australia, as a miner . . . I am glad I voted against the matter –

et cetera.  So the expostulation is not really relating insurance to social services.  What he is doing is just saying, like State banking and State insurance, it is a matter for the States.  He is not saying any more than that.  So that is all I wish to say about history.  Of course, in dealing with insurance the analogue was New Zealand which we know was not compulsory and was simply New Zealand having its own life insurance company.

KIRBY J:   Yes, but the power was granted in general terms and unless you take an originalist view, it is interesting to study this, but the Constitution is intended to endure from age to age and you cannot restrict it to what was in the minds of Mr Barton or Mr Isaacs.

MR BENNETT:   No, your Honour, one does not.  I also have a lot of authority in this Court on that topic which I will come to, but clearly, if State insurance meant what New South Wales says it means, it would simply mean that any laws about insurance that the State makes are State insurance and therefore, in effect, the grant of power to the Commonwealth is meaningless.  To give the words meaning, we would submit, the meaning that must be given is the State carrying on the business of insurance, as with banking.  State banking cannot mean the State making laws about banking for all banks in the State or the State licensing who carries on banks and regulating them closely, and nor can State insurance, but I will come to that, and that is my fifth topic, and I have just finished dealing with the third.

KIRBY J:   The trouble is that once you accept the notion that you are talking about State insurance as an institution, though it says insurance not insurer, then the very nature of this type of insurance has from the very beginning in Bismarck’s Germany seen a very close integration between the raising of a very big pool for the premiums in order to be able to make this form of insurance viable and, therefore, the two are not divorced but very closely interconnected.

MR BENNETT:   Your Honour, if one says that, that is, we would submit, something squarely within the Commonwealth area of insurance.  The question is:  what is taken away from that by State insurance?  If it means insurance controlled by the State, including in a monopoly situation or an oligopoly situation where it controls everyone, then one reduces the power to nothing because the State can legislate in that form in relation to all forms of insurance.

With all forms of insurance, obviously the bigger the pool the more efficient it is.  If one has compulsory insurance, one avoids the problem of adverse selection because one does not just have the good risks insuring – one does not just have the bad risks insuring.  So obviously compulsory insurance may offer all forms of attraction in all areas of insurance, but once the one entity is given the control of insurance generally and the other is given the specific thing about State insurance, that has to mean something different from those aspects of insurance generally which the State chooses to cover. 

The meaning that has been given, the meaning that was given by the founders in the Debates, for what that is worth, and the meaning given in the authorities in this Court is, we would submit, the only sensible meaning, which is insurance carried on by the State in the milieu controlled by the Commonwealth.

GLEESON CJ:   Is that a convenient time, Mr Solicitor?

MR BENNETT:   Yes, your Honour.

GLEESON CJ:   We will adjourn until 2.15.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.18 PM:

GLEESON CJ:   Yes, Mr Solicitor.

MR BENNETT:   Your Honours, the fourth matter is a very brief matter.  It concerns a submission made by my learned friend, the Solicitor‑General for Victoria, at page 19 of the transcript, and it is an argument which we submit could very well have applied to my learned friend Mr Hanks’ metaphor about a tail wagging a dog.  What my learned friend said was this: 

We would say, your Honour, that insofar as the Commonwealth legislation renders null or nullifies any liability that there might be under the State laws that that would not be something which the Commonwealth could do in the face of the restriction in 51(xiv) –

HAYNE J:   Which page, Mr Solicitor?

MR BENNETT:   Page 19, your Honour, point 3.

HAYNE J:   I think not.

MR BENNETT:   Page 19 of 72.  Do your Honours have a different print?

GUMMOW J:   What line?

MR BENNETT:   Mine does not have lines on it.  It came off the internet.

HAYNE J:   Times of economic stringency for the Commonwealth no doubt, Mr Solicitor.

MR BENNETT:   Yes.

GUMMOW J:   This is your department’s electronic age.

MR BENNETT:   Well, your Honours, in a sense I only need to state the argument to show its fallacies, but your Honours do not need to go to the passage.  But what my learned friend submitted was that if we remove a liability against which a party might insure with the State, that is in some way affecting State insurance because we are doing indirectly what we cannot do directly.

There is a number of answers to that.  The first and most obvious one is that it is the tail wagging the dog.  It is saying that the fact that a liability might be insured against is more relevant than the liability itself.  The principle itself about not doing indirectly what cannot be done directly is in fact a principle which says you cannot do indirectly what is prohibited directly.  The principle does not extend to saying that if you do not have power to do something directly, you cannot have power to do it indirectly. 

Your Honour the Chief Justice makes that point very clearly in Pacific Coal (2000) 203 CLR 346. It is at paragraph 29. I will not take your Honours to it but it is very clear that there is no rule that says that where the Commonwealth does not have power to do something, it cannot achieve that indirectly. The rule simply is that where there is a prohibition on the exercise of a power, one cannot avoid that by doing something indirectly. In any event, it is not doing indirectly what cannot be done directly because of the tail and dog point. So we submit that argument only has to be stated to be rejected. It is page 26 of your Honour’s transcript at the very top of the page. I am not sure why the internet numbers it differently to the other one but there is no doubt some reason.

KIRBY J:   Formatting.

MR BENNETT:   Yes, your Honour.  That is something I have never been very good at.  The fifth matter is the New South Wales argument which declines to accept the concession made by the parties that “State banking” means the business of banking carried on by a State and that “State insurance” has the same meaning.

I have referred to that already, but there are three points we make about it. The first is the simple logical construction point, that if “State banking” meant the regulation of banking by a State, similarly with “State insurance”, that would completely destroy the Commonwealth power or make the Commonwealth power totally subject to the State because if the State chose to regulate banking or insurance within that State, that would make that State a no‑go area for the Commonwealth power and that is just not a sensible way of reading the exclusion. To give a power excluding that power when exercised by a State would be to incorporate in section 52 a reversal of section 109.

KIRBY J:   What do you say to Mr Mitchell’s argument that the word used in the paragraph is “insurance” not “insurer”?

MR BENNETT:   Well, your Honour, the – and in the previous power it is “banking” not “a bank”, but that is just a description of the subject matter.  It was considered convenient to – when one looks at the Convention Debates one sees the use of the English words in quite a funny way and one frequently sees references to State banking which clearly in their context mean – and I will show your Honours this in a moment – the carrying on of the business of banking by the State where they use words like “the system of State banking” and so on.  They use words which contain an ambiguity, but the context and the statements about it make it absolutely clear what they are saying.

I suppose it was convenient to use the particular phrase, but the fact that another phrase could have been used does not dictate a contrary meaning.  The basic argument is the one I have just put, that it simply cannot mean State regulation of insurance or banking because that would totally detract from the power.

The second matter in relation to that and I appreciate that your Honour Justice Kirby gives this less weight but if one looks at the Convention Debates the meaning is quite clear.  Might I just take your Honours to Victoria’s first volume of materials, tab 9.  If one starts at page 778 - the first page of tab 9 is pages 778 and 779 although the numbers are obscured.  If your Honours go to page 778, the left-hand page, the right‑hand column of it, Mr Isaacs says:

Anticipating another subsection, I notice –

this is talking about banking -

that insurance, including State insurance, is to be dealt with by the federal authority.  As regards banking, I believe in South Australia there is a State bank.  It will be a question to seriously consider whether the Commonwealth is to deal with purely private banks, and not State banks.  I understand that it is intended to have uniformity of legislation in banking matters throughout the whole of the Commonwealth, that financial institutions shall know exactly what laws they have to comply with . . . over the various parts of the Commonwealth.  But where a State Bank carries on business purely in its own State, I desire to know why that should come under the operation of the Commonwealth?

Then there Dr Cockburn, after interjection by Mr Glynn, says:

Because the federal authority may take the power out of the hands of a State to carry on the business of banking.

Then they agree to that and then insurance.  Mr O’Connor in the first column on 779 says:

This is a new subsection.  It proposes to include insurance . . . It was suggested that colonies might undertake State insurance, as was done in New Zealand, and it was held that State insurance should not come under the general laws.  From that view I entirely dissent ; but this clause was drawn in accordance with the views of the Constitutional Committee.  The hon. member will see, therefore, that the words “State insurance” simply indicate that whereas a State within its own boundaries should have control of all its insurance business, and the regulation of its insurance under any State system, so far as it deals with people within its own boundaries, any part of its system –

“System” there must mean the system it owns, it is a peculiar use of words –

that proposes to deal with people beyond its boundaries should come under the general laws . . . 

Mr. ISAACS:   It would include all insurance then?

Mr O’Connor, and he makes it clear that he is using “system” in the peculiar way I have described:

Yes ; and I think it ought to.  If a State chooses to go into the business of insurance – I do not say it is wise or not – I do not see why any departure should be made as to the uniformity of laws with regard to insurance.  The State should be subject to the same limitations as the individual if it goes in for State insurance.  It would be absurd to say it should not.  Supposing every State adopted a system of State insurance, according to this exception each State would be able to adopt a different method, so long as it kept within its own boundaries . . . 

Mr. ISAACS:   Is that not States rights?

Mr. O’CONNOR:   No ; because you start with the proposition that general insurance laws must be the same throughout the colonies.

Then on page 781 over the page in the first column, at the bottom of the first column Mr Fraser said:

I do not think, notwithstanding what Mr. Glynn says, that the New Zealand Government Insurance department is doing any business outside New Zealand . . . 

Sir PHILIP FYSH:   Only that their policy-holders travel.

Mr. DEAKIN:   They only receive the premiums here.

Mr. FRASER:   If a policy-holder goes to Kamtschatka, of course the premiums will be paid to the department all the same.

Mr. DEAKIN:  Is it near Oodnadatta?

Mr Fraser seems to think it is.  But he then says:

I think it would be grossly unfair to allow a State to extend its operations in life or any other insurances beyond its own limits.  A department might be as rotten as possible, and carry on a huge business at great risk, and nobody would be able to control it.  I think it is the duty of the Federal Parliament to make a law for the whole Commonwealth, giving a State power to establish an insurance department within its own borders; but to give a department the liberty of going outside its borders would be as absurd a thing as could be allowed.

Mr Higgins then ‑ ‑ ‑

KIRBY J:   Of course all of that shows how wrong it is to give too much weight to this material, given the way extraterritoriality developed when the British Empire declined.

MR BENNETT:   Yes.  I only cite the material really for the old‑fashioned purpose of showing the mischief that they were concerned with.  The mischief they were concerned with was that a State should be able to have its own insurance company or banking company but that if it did business outside the State it would be subject to the same federal control as everyone else.

KIRBY J:   I suppose you say along the lines of your argument just advanced that if it is that, if it is the State insurance office, then to permit the State under that rubric to require compulsion so that everyone goes into it necessarily impinges on and excludes the proper operation of what is functionally expected to be the federal power over insurance?

MR BENNETT:   Yes, precisely, your Honour, that is the other aspect of it.  There is only one more quotation in this line, and that is Mr Higgins a little further down on the first column of 781 where he says:

My idea is this:  That the Federal Parliament should be allowed to deal with all insurance matters, with only one limitation.  I would refrain from dealing with State insurance in the colony establishing it, but if that colony extends its operations to other colonies, I do not see why it should not be treated like an ordinary company.

He is very much talking about the State as an insurer, and they all are.  Mr Walker, who votes against it, says at the bottom of the next column:

I am sufficiently old‑fashioned to consider that insurance is a business, and I therefore want law to apply to all insurance companies, whether State insurance companies or otherwise.  I intend to vote against any amendment.

So even the person voting against what he regards himself as voting against is very clearly an exemption for State insurance companies.

GLEESON CJ:   I notice that Quick and Garran, referring to this paragraph and the words “other than State insurance”, say that these are words of exception reserving to a State the control over insurance business organised and conducted by the government of the State.

MR BENNETT:   Yes, well, that is another way of putting it, your Honour, yes, which falls short of the New South Wales extension which talks about insurance regulated by the State.  We are talking about insurance by the State.

GLEESON CJ:   I think as Mr Hanks said, private insurance is not an exact antonym for State insurance but, roughly, it serves the purpose.

MR BENNETT:   Yes.  Incidentally, your Honours, in relation to the distinction between State banks and State banking, Justice Selway at page 75, referring to the debates, says that:

Some of those legislative bodies suggested that the proviso refer to “State banks” rather than “State banking”, but it would appear that the two terms were treated by those at the conventions as being interchangeable.

He refers to some passages on that.  Now, finally, this Court has firmly accepted the view for which I submit and not the view for which New South Wales submits.  May I remind your Honours of Melbourne Corporation v The Commonwealth, (1947) 74 CLR 31, and your Honours will see that each of the six Justices who sat in that case took the view for which I am contending. The Chief Justice at page 52 says at point 2:

The words to be construed in the exception “other than State banking” constitute a compound phrase – “State banking.”  The question is – What is the natural signification of those words?  In my opinion if the question were asked with respect to a particular country, “Is there any State banking in the country?” the question would be understood to be an inquiry whether the State conducted banks in that country.  It would not be understood to be an inquiry whether some State had dealings as a customer with any banks in that country.  “State banking” in my opinion refers to banks established and conducted by a State or by an authority established under State law and representing a State.

At page 65 Justice Rich says at point 3:

In my opinion s. 51(xiii.) must be construed in the light of what I consider to be the ordinary and normal meaning of the word “banking” and if this be so, the words “Banking other than State banking” should be construed as meaning the business of banking other than the business of banking carried on by a State.

That is confirmed by the remaining words of placitum (xiii) because they obviously could not apply to the State as a customer.  They also, of course, could not apply to the State as a general regulator because the State as a general regulator of banking in the State is hardly going to extend beyond the boundaries of that State.

The founders did not have the benefit of your Honour’s decision in Sweedman to consider in relation to that.  Justice Starke at the top of page 70 says:

State banking excluded from the banking power relates, in my opinion, to banking operations conducted by banks owned or managed by State Governments or any authority of a State Government and does not extend to transactions or other facilities with banks, other than State banks, of which a State avails itself.

Without taking your Honours to it, Justice Dixon says it at 78, Justice McTiernan at 86 and Justice Williams at 97, so all six Justices in that case.

In Bourke’s Case 170 CLR 276 it is assumed for the purpose of the decision. At page 284 in the judgment of all seven members of the Court in the middle of the page, after citing placitum (xiii) their Honours say:

For the purposes of s. 51(xiii), “State banking” is the business of banking conducted by a bank owned or controlled by a State.

The word “controlled” does not mean regulated.  That is probably there to cover the situation where one has a bank where the State has 60 per cent of the shares, that sort of situation.

GLEESON CJ:   It might cover the case of the nominal insurer in New South Wales. 

MR BENNETT:   It might well cover that, your Honour, yes, where there is a statement that it is not the State, but it is one of those “protesting too much” statements.  When one sees it there, one rather immediately says, “Oh well, obviously the opposite must be true and that’s why they’ve tried to say it”.

KIRBY J:   That might be thrown back at you at some future time.

MR BENNETT:   It may be, your Honour.

KIRBY J:   It is unlike you to make a concession.

MR BENNETT:   It is a concession about State law, your Honour.

CALLINAN J:   This sort of question was touched on in SGH.  We looked at the indicia, you remember, of whether it was a State, part of the State.

MR BENNETT:   Yes.  A number of these cases, including Bourke itself, discuss the Inglis v Commonwealth Trading Bank question of whether these bodies are the State or are not the State, and there is a series of tests laid down:  whether they have corporators, who appoints their boards, where their profits go and who audits them and so on.  It might well be held that despite that exclusion, that person is the State for that purpose, but your Honours do not need to answer that in this case.

In relation to New South Wales we do stress that the point they raise in relation to their legislation is not one which arises in this case.  There is a real question in any event whether it is covered by the 78B notices.  We would submit your Honours simply would not deal with it.  Your Honours would just accept the concession that has been made and the clear authority in support of it and the New South Wales submission is really for another day when their Act is before your Honours.

Sixthly, I will not take your Honours through it but I do commend to your Honours the judgment of Justice Selway at pages 73 to 87 which deal with the issue before the Court, particularly paragraph 69 where we would submit his Honour very clearly and very persuasively sets out the application of Bourke and its relevance in this case.

KIRBY J:   Can it be said on that last matter that I raised with you concerning the limit on the extent to which the State can blow up and magnify its insurance so as to destroy the federal power, that similarly the use by the Federal Parliament of section 51(xx), the corporation power, to intrude much further than in the present case would have the effect of rendering nugatory that area which is reserved by the Constitution to the States, if, for example, it moved in to effectively say every corporation will take out insurance with Comcare and to that extent exclude the operation of well‑known and long‑established State areas of workers’ compensation insurance.

MR BENNETT:   Your Honour, that is an issue which does not have to be decided in this case but ‑ ‑ ‑

KIRBY J:   Yes, but we have to look down the years, you see.  Experience teaches you, as I said, to be a little suspicious.  Once the toe is put in the water, it can sometimes lead on to the next step.  That is the history of federal accretion of power.

MR BENNETT:   Yes.  Well, your Honour, the issue which would arise in the example your Honour puts is whether in its application to State insurance such a law was a law which touched or concerned State insurance.  We accept that the Commonwealth could not pass a law prohibiting a person from insuring with a State insurer.  We accept that.

KIRBY J:   Yes, but what is the point of that if you have to insure with Comcare?

MR BENNETT:   That is the next step, your Honour.

KIRBY J:   Exactly.

MR BENNETT:   I have certainly put the converse, that a State law saying you must insure with the State insurer trespasses into the other area.  A Commonwealth law saying you must insure with a Commonwealth insurer would, we submit, be a law with respect to insurance.  The question is whether it is a law which is with respect to insurance other than State insurance, bearing in mind the effect which it would necessarily have on State insurance.  That would be a difficult question which would depend on a lot of aspects, including whether or not one was permitted to continue to insure with the State, whether there was a difference in the liabilities involved and so on, but ultimately we would submit that that would fall within the federal area. 

One must bear in mind that the ultimate touchstone of the division in placita (xiii) and (xiv) is that the Commonwealth controls the milieu and the State is allowed to operate within the milieu with its own insurance company ignoring Commonwealth regulation.  As in Bourke’s Case, a general Commonwealth law which in its relevant application was a law with respect to banking could not apply to it in the conduct of its business.

Bourke’s Case, of course, says that that only applies where the law is at least as one possibility a law that can be justified under the banking power.  So if, for example, there was a Commonwealth law passed under the quarantine power saying that all businesses in an infected town had to close for a period, that would apply to a State bank or State insurance company.  That is not a law with respect to insurance or banking, even in its relevant application, and the fact that it may cause the State bank or State insurance office to close down along with the other businesses in the town would not take that outside power.  On the other hand ‑ ‑ ‑

KIRBY J:   Do I understand that the Commonwealth concedes that the expansion of the operation of legislation under the corporations power to require all corporations in the Commonwealth to insure with a federal insurer for the purpose of conforming to liability under the Comcare legislation would have to be measured against the effect that that form of legislation would have on the existence and viability of the zone of State insurance which is reserved to the States by the Constitution?

MR BENNETT:   I concede one would have to ask the question.  The answer to it might well be that it does not sufficiently touch and concern State legislation other than incidentally in the context.

GLEESON CJ:   You said State legislation.  Do you mean State banking?

MR BENNETT:   I mean State banking or State insurance.  But I accept that would be a borderline case and there would be difficulties involved in that which we do not need to answer today.

KIRBY J: So it is an example of reading section 51(xx) in order to conform with the restrictive provisions in section 51(xiii) and (xiv)?

MR BENNETT:   There are situations where one has to do that and Bourke itself was an example of the trade and commerce power.  There was legislation passed under the trade and commerce power, but also because of the definitions, at least in part, under the banking power, and it was therefore a law with respect to trade and commerce and in its relevant application a law with respect to banking and it was held in its application to the business of a State bank it was invalid. 

GUMMOW J:   Section 52 in Bourke was treated as a law with respect to financial corporations?

MR BENNETT:   In its relevant application, yes, your Honour, because of section 6 which distributed the range of ‑ ‑ ‑

GUMMOW J:   Yes.  There was no complaint that that was an invalid use of the corporations power?

MR BENNETT:   No.  Now, there is only one other thing I want to say about that – and this is the seventh of the 13 – and that concerns the passage which is frequently referred to in Bourke which appears at page 289.

KIRBY J:   Is this the “put it another way”?

MR BENNETT:   Yes, your Honour.  What we say is it is not put ‑ ‑ ‑

KIRBY J:   It sounds as though that might have been tacked on.

MR BENNETT:   Yes.

KIRBY J:   Somebody thought they could put it another way, better and clearer.

MR BENNETT:   Yes.  Well, your Honour, academics always say that joint judgments are better than separate judgments.  This is an example, perhaps, of a situation where that maxim breaks down, where one sees a passage in a joint judgment where something has been tacked on that is really inconsistent with the rest of it.

KIRBY J:   Or so you say.

MR BENNETT:   Yes, one does not know, of course.  But, your Honour, we have not sought to ask the Court to overrule Bourke, but we do say that this passage is one which should not be accepted.  It is a dictum, in a sense, putting another way what the ratio is, and erroneously putting it another way.  It is not putting it another way at all; it is saying something quite different.  The previous sentences, having discussed the question of whether the limitation in the banking power is one which is something given exclusive control of an area to - giving exclusive power to the State, and they reject that.  There is then the question whether it limits other powers, and they come to a compromise solution on that.  They say it limits other powers, but only where the relevant legislation is also a law with respect to banking.  That is the paragraph beginning:

The only satisfactory solution to this problem is to accept that there is no exclusive State power to make laws with respect to State banking. But the words of s. 51(xiii) still require that, when the Commonwealth enacts a law which can be characterized –

and one probably needs to insert the words “in its relevant application”, because in Bourke’s Case of course you clearly could not characterise this law as a law with respect to banking except in the very limited application ‑ ‑ ‑

GUMMOW J:   The problem with that passage you were directing attention to at the top of 289 is that the words in the paragraph are not with respect to State banking.

MR BENNETT:   Yes, your Honour, that is the other problem with it.

GUMMOW J:   You mentioned it before lunch, I think.  They precede the power itself, but they are not words linked to this exception, or whatever you call it.  It just says “State banking”, “except State banking”.

MR BENNETT:    Yes.

GUMMOW J:   So that whole analysis of familiar process of characterisation is fine, but it is characterisation in another context.

MR BENNETT:   Yes, and your Honour, the passage they cite from Melbourne Corporation of course is a passage where the Court was talking about a power, not a limitation on a power, and it was saying that to come within a power the connection with a power must not be so insubstantial, tenuous or distant that it does not really come within it.

So I suppose if one had a law which said, “If a person has ever been a lighthouse keeper he or she shall not drive at more than 30 miles an hour”, that would be a law which had such a distant, tenuous or insubstantial connection with lighthouses as not to fall within the lighthouses power.  That is what was being talked about in Melbourne Corporation and that is then applied to a qualification to a power and, in our respectful submission, that is an application completely out of context.

GLEESON CJ:   I suppose you can test it by reference to laws with respect to currency or whatever is the example you referred to earlier – bills of exchange and promissory notes.  That would not have an insubstantial, tenuous or distant connection with banking, one would have thought.

HAYNE J:   Indeed, Mr Rose in that article that is attached to your materials suggests that the consequence of the statements made in Bourke would be that the Cheques and Payment Orders Act has no application to State banks.

MR BENNETT:   Yes.

HAYNE J:   That is at tab 4 of the Commonwealth bundle at page 199 of the extract from the Monash University Law Review footnote 20.

MR BENNETT:   Yes, and your Honour, we simply submit that the reference at the top of page 289 is simply incorrect and it is a dictum which the Court should not accept.  It is not putting another way what appears before or after, and it is taking words from a totally different context and applying them in a place where they have no business to go.  The Rose article of course goes much further in relation to its criticism of the case.

GUMMOW J:   He was an unhappy member of your team.

HAYNE J:   An unhappy litigant.

MR BENNETT:   Yes.

GUMMOW J:   An unhappy member of your Commonwealth team.

MR BENNETT:   Your Honour, many people are unhappy litigants.  The eighth matter concerns the DOGS Case.  I stress that we do not need to rely on the DOGS Case the way we deal with this case.

KIRBY J:   You refer to it an awful lot in your written submissions.

MR BENNETT:   We refer to it a bit, your Honour, but all it says ‑ ‑ ‑

KIRBY J:   Over and over and over again we get it.  It has had a rough trot during the oral argument so far.

MR BENNETT:   Your Honour, I am not going to say a lot about it.  The short point it makes is indisputable and that appears fairly clearly from the judgment of Chief Justice Barwick in Wragg v New South Wales (1953) 88 CLR 353 at 386. The point simply is that where one has a conferral of a power, as a general common law matter that is construed as carrying with it matters incidental to the power, things necessary for the exercise of the power and various matters. It is read in an expansive way. That principle does not apply to prohibitions or qualifications on powers. That is really all the cases say. It does not go any further than that. We do stress, however, that there are four Justices in the DOGS Case who accept the principle for which we have ‑ ‑ ‑

KIRBY J:   Yes, but one – I think it was Justice Aickin – agreed with the Justices who had completely different views.

MR BENNETT:   No, your Honour.  He agreed with two Justices, both of whom supported what we have said.  Perhaps I will just show your Honours ‑ ‑ ‑

GUMMOW J:   I am not sure Chief Justice Mason’s later judgments altogether continue that attitude.

MR BENNETT:   I will come to the later cases in a moment, but if I can just show your Honours that the DOGS Case does clearly decide it.  Justice Mason makes the point at pages 614 to 615 where he simply says in effect that extension of constitutional powers by reference to denotation does not apply to prohibitions.  Justice Gibbs says the same at page 603.  He says:

It was submitted on behalf of the plaintiffs that the words of s. 116 should be given as broad and liberal a construction as possible. That would not justify giving the words . . . an expanded meaning which they do not naturally bear. In any case, the establishment clause imposes a fetter on legislative power, and unlike the words which forbid the making of any law prohibiting the free exercise of any religion, does not do so for the purpose of protecting a fundamental human right; indeed, the purpose for which it was inserted in the Constitution remains obscure. There is no reason to give such a provision a liberal interpretation . . . necessary to determine the meaning of the words ‑ ‑ ‑

KIRBY J:   That is very linked in to the particular provision, though, is it not?

MR BENNETT:   Yes.

KIRBY J:   His Honour is not purporting to propound some general principle of constitutional approach.  I think, elsewhere we were read a passage where he said you have to give all the words their natural meaning.

MR BENNETT:   Yes, but if one reads that paragraph carefully, he says it imposes a fetter on legislative power and not a human right and there is no reason to give such a provision, ie, one imposing a fetter.

KIRBY J:   That is, one that was affecting a human right.

MR BENNETT:   Not affecting a human right.

KIRBY J:   Your voice dropped when you came to that passage “human right”.

MR BENNETT:   The provisions here do not affect human rights either.  I do not think any of my friends would submit that the rights to run State insurance is in some way a human right.

KIRBY J:   But Chief Justice Gibbs was referring in the context of the DOGS Case and religious freedom and the secular nature of our society.  One day that case will have to be revisited.  Period.  In my opinion.

MR BENNETT:   There are other aspects of it.  The general principle of construction for which I am citing it is one in which, in my respectful submission, Justice Gibbs is clearly supportive of.  Then Justice Aickin at 635 agrees with Justices Gibbs and Mason and, as I have said, both of those say what we have said.  Justice Wilson at 652 to 653 says the same thing, this is three lines from the bottom of 652:

The plaintiffs’ plea for a broad construction overlooks the fact that we are dealing with a clause which does not grant power, but denies it.  While it is true that a constitutional grant of plenary legislative power should be construed with all the generality which the words used will admit, carrying with it whatever is incidental to the subject‑matter of the power, the same is not true of a provision which proscribes power ‑ ‑ ‑

KIRBY J:   Even though it is reserving power to another unit of the Federation. I just think that is a warped and unbalanced and non-neutral approach with respect to the way you approach the determination of where the power lies – federal or State. We are supposed to be neutral here, you know. We are the guardians of the fair distribution of powers provided by the Constitution.

MR BENNETT:   It is not a denial of neutrality to apply standard rules of construction which operate differently on grants and exceptions from grants.  If the rules of construction apply differently to those two things, a neutral approach has that result.  The neutral approach does not require one to apply a rule of construction to matters where under the terms of the rule it does not apply or applies with less force.  It is not, we would submit, an absence of neutrality.

One gets the same result as the DOGS principle by simply saying that the width of the power comes from the words “with respect to” and those words do not qualify the proviso in the same way.  It is the same construction or approach.  There are references in State Bank of New South Wales and SGH and in, I think, Eastman to these words in the DOGS Case.  The references are:  State Bank (1992) 174 CLR 219 at 229; SGH (2002) 210 CLR 51 at paragraph 14; and Eastman (2000) 203 CLR 1 at 44, paragraphs 139 to 140.

What those cases or passages simply say is that there is less reason for applying the DOGS principle in cases where there is not a clear mischief which was involved.  Here we have a very clear mischief and the mischief is a limited mischief; it is the need of the States to operate their own banks or insurance companies and to do so within their own States free of federal control.  That is a limited mischief and so the words of exclusion which are applied do not affect the application of the DOGS principle.

Ninthly, I want to say a little bit about common law liabilities.  There has been a great deal of discussion, we would submit largely irrelevant, about the extent to which the various Acts, particularly the State scheme and the federal scheme affect common law liabilities. 

We simply say this, that in any workers’ compensation scheme, one of the elements which will have to be dealt with is the relationship between that scheme and common law liability.  One might have a scheme which totally replaces common law liability, as in New Zealand.  One might have a scheme which leaves common law liability unimpaired, but says one subtracts the compensation from the verdict, as in New South Wales, certainly for many years.  I am not sure if that is still the situation in New South Wales.  One can have a scheme like the Commonwealth scheme which has an election to take either the workers’ compensation or the common law verdict.  One can have a scheme like the Victorian one which caps the common law liabilities and merges them into the overall scheme.

The point we make is this, that these are very much part of an overall workers’ compensation scheme. How one deals with that interface is part of the scheme. Indeed, this ties in with Victoria’s submission about the Acts being read together. Our scheme controls it, their scheme controls it and one would expect therefore, under section 109, that ours covers the field and theirs falls.

GUMMOW J:   Does it need to cover the field?  Can one look at 82 of the thicker Victorian Act, a worker shall be entitled to compensation?  Then you ask yourself, well, what about this worker who is an employee of Optus and Optus has this licence and 108(1) of the federal Act says that Optus is liable to pay compensation under the federal Act?

MR BENNETT:   Yes.

GUMMOW J:   End of story, 109 operates then on 82.

MR BENNETT:   Precisely, your Honour.  Your Honour anticipates where I am going.

GUMMOW J: Then what is the connection between 82 and section 7 of the thin Act? Section 82 has gone on this hypothesis. Is there any work relevantly for 7 to do, of the thin Act?

MR BENNETT:   No, your Honour, none, and even if it may have work in the sense that ‑ ‑ ‑

GUMMOW J:   In relation to this Optus worker, I mean.

MR BENNETT:   Yes.  Even if it may have work in relation to a common law liability on some construction of the Acts together ‑ ‑ ‑

HAYNE J: No, no, there is a 109 problem, Mr Solicitor, which I want you to grapple with. If you have gone to 82 and 108A(1)(c) and you have decided that 82 is subject of 109, what is the consequence, if any, that follows for section 7 of the State Act? Is section 7 wholly, partly, not at all invalidated by 109 in consequence of what has happened in relation to 82?

MR BENNETT:   Your Honour, we say it is invalidated because the whole scheme is one that covers the field and that includes the scheme of insurance.

GUMMOW J:   Yes, but there may be a direct collision, you see, with 82.

MR BENNETT:   Yes, but the ‑ ‑ ‑

GUMMOW J:   If there is a direct collision with 82, does 7(1) have any work to do because what is the employer’s liability under the fat Act that has been knocked out by 109.  That is the question.  It is one of the questions anyway.

MR BENNETT:   Yes, and ‑ ‑ ‑

HAYNE J:   Unless you say 108A(1)(c) is a law with respect to insurance, we have yet to encounter a 51(xiv) problem.  We simply have an orthodox application of 109.

MR BENNETT:   Your Honour, we agree with that.  We submit a law which says an employer shall pay compensation to an employee who suffers an injury at work is not a law with respect to insurance.

GUMMOW J:   It might be a law with respect to posts and telegraphs because of Optus’ position.

MR BENNETT: Yes, it might be. It might be a law with respect to corporations, it might be a number of things, but it is not a law with respect to insurance as such, and 109 has a very simple application. We have set up a scheme under which Optus has to pay compensation to its employees. Victoria has done the same thing. One aspect of each scheme is the interface with common law. One aspect of each scheme is the obligation or absence of an obligation to insure. All that means that the one overrides the other under section 109.

KIRBY J:   But one aspect of the State scheme is the provision of compulsory insurance and the suggested need of that compulsory insurance in order to provide the fund of premiums that is needed for the operation of such a universal scheme covering every situation.  They cannot turn away employers.  They have to cover them.  So you take the good and the bad, and the way that can operate is by compulsory universal insurance.  So they are highly integrated.  That is the suggested quality that brings what otherwise would be classified and characterised as a workers’ compensation law as a law with respect to State insurance.

MR BENNETT:   Yes.  Your Honour, our answer to that is that the compulsion, for the reasons I have given earlier, is part of the milieu and not part of the State insurance.  Of course there is a relationship between them, but the limitation on power is not with respect to State insurance; it is narrower than that.  We submit that the compulsion is moving into the milieu, moving away from the regulation of what the particular company does and what its insurants do.

KIRBY J:   Whenever counsel start using foreign words, I get suspicious that they cannot really explain what they are saying.

MR BENNETT:   Your Honour, I am not sure “milieu” is a totally foreign word.  I think it probably is part of English now.  But it means the environment – the environment of the insurance industry, if one likes, the marketplace, if one likes.  One can use various words.  We control the marketplace and the regulation of insurance companies other than their companies.  Their companies can exist in a sort of Alsatia, I suppose, where they ignore Commonwealth regulatory laws.  That is Bourke.

That does not mean that the marketplace, the environment in which insurance companies operate, and the foreign word “milieu” if it is a foreign word, is something that the State can control to the exclusion of us. That is the short point in relation to that. I am reminded, of course, that section 7 of the thin Act still purports to require the insurer to employ liabilities at common law and otherwise arising. It is an overall scheme which is inconsistent with the Commonwealth scheme and section 109 is what happened. So where this leaves me ‑ ‑ ‑

GUMMOW J: Section 7 only begins to speak if the thicker Act operates, and if 82 has been struck out, section 7 does not have any relevant work to do, so there is no problem.

MR BENNETT:   Well, that is so.

GLEESON CJ: Yes, but Mr Leeming says that the Commonwealth Act preserves a common law liability of the kind referred to in section 7.

MR BENNETT:   Yes, within limits it does, as does the Victorian Act within limits. 

HAYNE J:   The difficulty is the level of abstract generality in which the proposition is put.  Yes, there are common law liabilities, but they are radically altered by the two legislative schemes.  One is subject to serious injury camps, another is subject to elections and the like.  Yes, they are both capable of description as common law liabilities, but rather different.

MR BENNETT: Yes, and the way we put it is that the non‑insurance part of our law, like the Victorian law, deals with the relationship between the compensation and common law, has a method of dealing with it and that is the field covered by those sections which override the different State provisions in 134AB, I think, and some different liabilities may be left. They might on their face, as a matter of construction, have been picked up by the words “or otherwise” in section 7 of the thin Act, but if they are, that would be a classic case of the State Act altering, impairing or detracting from the scheme set up by the Commonwealth Act, saying that the liability end of the Commonwealth Act has to be insured in a particular way and, as opposed to the Commonwealth Act which specifically says that certain classes of people who are shown to have sufficient assets may self‑insure and they are not bound to insure.

GLEESON CJ:   We are working towards completing at 4.00 pm this afternoon.  Are you on track for that?

MR BENNETT:   I am, your Honour.  I am getting close to the end.  So, your Honours, the immediate point is that sections 104 and 108 of the Commonwealth Act which the State seeks to attack, they being the provisions for licensing of entities and regulating the liability of those entities, we submit, are clearly laws which are valid other than under the insurance power and, indeed, have nothing to do with the insurance power, except in one small application.

If the federal Act did not have 108A(7)(a) in it, all its work would be done by section 109 of the Constitution, so there is nothing there, we would submit, to invalidate.

There is one minor aspect of that I need to deal with and that is the proposition that where one has a head of power of this type prohibiting an activity or permitting an activity or saying that a person may choose not to engage in the activity, all those things are included in it.  One could run through – this is the week of the Julius Stone lecture, so it is perhaps appropriate to make this submission – Hohfeld’s various categories about rights, obligations, duties, immunities and so on and say that all of those are covered.  So a law saying a person shall not issue insurance or shall not take out insurance is a law with respect to insurance.  A law saying a person may insure or may choose not to insure is a law with respect to insurance.  We submit those matters fall squarely within the Commonwealth area. 

I simply remind your Honours of a number of cases which deal with that, and your Honours need not go to them:  Milicevic v Campbell (1974‑75) 132 CLR 307. At 313 point 2 Chief Justice Gibbs makes the very well‑known point that under a power to deal with trade and commerce we can pass a law prohibiting trade and commerce in heroin. The same thing appeared in I think the Radio Corporation Case where there was a prohibition on the importation of certain radio parts.

KIRBY J:   Why does not your earlier logic require that one says that that is a law on every other subject except trade and commerce because it is prohibited?

MR BENNETT:   Because, your Honour, our power is “with respect to”.  Once the power is “with respect to”, it is with respect to insurance to say you may not insure or you need not insure.  It also appears in Murphyores (1976) 136 CLR 1 – again, I will not take your Honours to it - at 11 per Justice Stephen. Chief Justice Barwick and Justice Gibbs agreed. Justice Mason at pages 18 to 19 made that point fairly strongly and Justice McTiernan at page 8. If I could just remind your Honours what Justice Mason said in Murphyores.  Your Honours need not go to it, it is only one sentence:

The power conferred by s. 51(i.) enables the Parliament to prohibit, regulate and control the importation and exportation of goods, matters which lie at the heart of trade and commerce with other countries.

He cites a string of cases for that, including Radio Corporation.  So, to the extent that our law says a licensed corporation may choose not to insure under State law, that is a valid law with respect to insurance, and we have given reasons why it does not touch or concern State insurance.

There is a discussion of that issue, the issue of prohibitions in the Banking Case where there was a question whether a total prohibition on banking was within the banking power.  Justices Rich and Williams expressed a view contrary to the view I am putting; that is at page 258 of 76 CLR.  But all the other Justices agreed with what I have said - Justice Dixon at 334, Justice Latham at 197, Justice Starke at 301 to 302 and Justice McTiernan at 392 to 393 and the issue was not considered by the Privy Council, it just did not arise there.

For those reasons, insofar as subsection (7) provides that certain people may choose not to insure, that, we submit, is squarely within the milieu and the obligation it negates which my learned friend describes as fracturing the relationship is not fracturing the relationship at all.  It simply takes away the compulsion to engage in it and that compulsion, as I have submitted, is something within our part of the power, not within the State parts of the power.

For those reasons, it is my submission that all the provisions which are challenged are valid.  My learned friend did indicate that she would be producing an amended notice of appeal.  That has not occurred so I do not know if any sections other than the ones I have referred to are attacked, but if an amended notice is filed, I seek leave to deal with anything it raises in writing.

GLEESON CJ:   Yes, Mr Star.

MR STAR:   If the Court pleases.  The first respondent adopts the submissions of the Attorney-General for the Commonwealth and the first respondent has also filed short written submissions as to costs dated 19 July 2006.  The second respondent also adopts the submissions of the Attorney‑General for the Commonwealth and the second respondent also adopts the written submissions of the first respondent on costs.

For clarity and in light of the concession made by Mr Hanks for the fourth respondent, the VWA, on costs, I just want to point out what is left on the issue of costs and I think I can do that expeditiously by taking the Court to the submissions of the first respondent dated 19 July 2006.  Of course, the second respondent adopts those submissions in relation to itself and where the first respondent seeks a costs order if the appeal is dismissed, the second respondent also seeks a costs order in its favour, but most relevantly paragraph 3.2 deals with what are the outstanding costs issues between the fourth respondent, the VWA, and the first and second respondents.

As we have heard from the fourth respondent today, the VWA does not seek costs orders in its favour in relation to the Federal Court proceedings or this High Court appeal.  However, as I understand it, there is still sought to have Justice Selway’s costs order set aside should the appeal succeed.  That is resisted by the first respondent for the reasons in paragraph 3.2.2 of the written submissions, and the second respondent adopts that submission for the same reasons, namely, there was a trial on administrative law issues in addition to the constitutional law issues.  I do not want to labour the point.  I just want to point out to your Honours that there is that issue on costs to be dealt with.

GLEESON CJ:   Thank you.

MR STAR:   If the Court pleases, they are all the submissions for the first and second respondents.

GLEESON CJ:   Thank you, Mr Star.  Solicitor‑General for Victoria.

MS TATE:   Yes, your Honour, I will endeavour to be very brief.  Your Honours, we have provided to your Honours’ associates copies of the Acts passed by the Western Australian and the South Australian Parliaments at the turn of the century in response to Justice Callinan’s request.  There were two such pieces of legislation.  The first is the Western Australian Act of 1903 assented to on 19 February 1902.  Your Honours, this Act is equivalent to the 1897 Imperial Act which is to say that it imposes an obligation to compensate injured workers.  So it is one step in advance of simply the removal of the defence of common employment, but it imposes no obligation to insure upon employers.

The other Act, your Honours, is the South Australian Act of 1900 and, similarly, this Act again imposes no obligation on employers to insure, but it does introduce a no fault compensation obligation on employers.

Secondly, if I could hand to your Honours a note we have prepared first of all in relation to the question raised by Justice Hayne as to whether or not there was a definition of “State insurance” in the Knibbs Report.  We have prepared a note on that and we have also prepared an amendment to paragraph 9(2) of the notice of appeal, and they are together in bundles, your Honours.

GLEESON CJ:   Thank you.

MS TATE:   Might I indicate also that with respect to the construction of 108A(7)(a), we adopt Mr Leeming’s submissions, which is to say that unless the expression “law of a State relating to workers compensation” extended so far as to include section 7(1)(a) of the State Insurance Act, then section 108A(7)(a) would not achieve its intention because the obligation to insure would remain but it would be an obligation to insure in relation to the restricted common law liabilities preserved by section 45 of the Commonwealth Act. As that would be a capricious result, it supports the view that the proper construction of section 108A(7)(a) and, in particular, the expression “law of a Sate relating to workers compensation” must extend as far as the obligation to insure under section 7(1)(a).

HAYNE J: Why does the obligation to insure under 7(1)(a) survive the application of section 109 in relation to the intersection between 108A(1)(c) and section 82 and the consequences for liability under the Act?

MS TATE: Well, your Honours, we would say that if section 82 was struck down by reason of its inconsistency with section 108A(1)(c) of the Commonwealth Act, then the only effect of that would be that the obligation to pay compensation under the State Compensation Act would have been rendered invalid or inoperative to the extent of the inconsistency, but we would say insofar as section 7(1)(a) contemplates that the obligation extends to the insurance of common law liabilities and, indeed, or otherwise, as it is phrased, we would say that the obligation to insure simply remains, your Honour.

HAYNE J:   Now, that would mean that that provision or that obligation would remain despite the invalidation by 109 of the capping provisions of the Victorian Act, would it?  First, would there be such an invalidation of the capping provisions of the Victorian Act?

MS TATE:   No, your Honour.

HAYNE J:   Why not, in the face of section 45 and 45(4)?  Would you not say that the common law caps prescribed by the Victorian Act are inconsistent with the common law adjustments made by the federal Act?

MS TATE: Yes, your Honour. The capping provisions and, indeed, the threshold conditions for the commencement of common law proceedings for damages under section 134AB would also be struck down to the extent of the inconsistency, your Honour.

HAYNE J:   Thus the only provision of the scheme which you say stands relevantly is that under 7(1)(a) which would oblige the taking out of a policy in respect of a different form of common law liability from that contemplated by 7(1)(a) and none of the other risks contemplated by that insurance.  Why would one get to that result?

MS TATE:   Your Honour, part of the intention behind the reasoning of Mr Leeming was to show that if the construction of 108A(7)(a) was not such that it extended to the 7(1)(a) insurance obligation then it did have a capricious result.

HAYNE J:   Yes, that assumed the premise which I am seeking to have you address and consider its validity.

MS TATE: Your Honour, might I seek to address the question that seems to have underlain some of those misgivings, your Honour, and that was the question of whether it would be permissible and whether it is permissible to use section 109 in the task of characterisation itself. Your Honour adverted to the tests of characterisation endorsed in Fairfax and Grain Pool of simply considering the privileges, duties, immunities conferred by a law and your Honour then asked how it could be that there would be a need to invoke section 109 to characterise the law. Of course, we have accepted that we have to depend upon section 109 to characterise the law as a law with respect to State insurance.

Our response to that query, your Honour, is that it is our submission that there is considerable significance to be attached to the fact that the power here at issue is a qualified power.  It is a power which in its expression requires a consideration of the relationship between the Commonwealth law and State insurance.

GUMMOW J: It does not when you are looking at section 82 of the fatter Act. It just does not.

MS TATE:   When one is asking the question, is this a law ‑ ‑ ‑

GUMMOW J: Nothing to do with insurance in section 82, is it?

MS TATE: Not with respect to section 82, your Honour.

GUMMOW J: That is right. The question then is: section 109 having worked at that level, what are the consequences then for construing what remains or what does not remain of the linkage with section 7 of the thin Act?

MS TATE:   We would say there, your Honour, with respect to 82 – and perhaps I should ‑ ‑ ‑

GUMMOW J: You then get into construction questions of section 7 of the thin Act.

MS TATE:   Yes, and I appreciate that.

GUMMOW J:   That is what we need to be assisted with.

MS TATE:   Of course.  Clearly one of the curiosities of this case in a sense, your Honour, is that the task of characterisation is a task that we are familiar with with respect to Commonwealth laws.

GUMMOW J: I am not talking about characterisation; I was talking about construction of section 7.

MS TATE:   As to whether it would extend to ‑ ‑ ‑

GUMMOW J: How it works. Assume section 82 is repealed for a minute. How would section 7(1) operate? It has not been repealed. It has been pro tanto annihilated but it may come back from the grave but it is not there at the moment, so how does section 7(1) work as a matter of construction?

MS TATE:   We would respond, your Honour, as I attempted to respond to Justice Hayne, by saying that section 7(1)(a) would continue to have an operation. It would have an operation with respect to the common law liabilities even though they are restricted under the Commonwealth Act. But, your Honour, perhaps I ought to correct an answer that I gave before when your Honour said to me that section 82 has nothing to do with insurance. We would say that insofar as the Commonwealth Act annihilated the liability to make compensation payments under section 82 of the State Act, that to that degree it was restricting and altering the obligation to take out insurance under section 7(1)(a) of the State Act.

CALLINAN J:   You cannot read section 82 in a vacuum.

MS TATE:   No, your Honour.

CALLINAN J:   You have to read it in the context of an Act which is concerned among other things, but principally with insurance.

GUMMOW J: I am reading them together and I look at the words “employer’s liability under the Accident Compensation Act 1985” in section 7(1) and then I ask myself, where is it? Then I look to section 82 and then I look to section 109. So I am not reading anything in a vacuum.

MS TATE:   And if it is struck down, it is not there.  I think yesterday, your Honour, when I was asked a similar question, my response was that the Commonwealth law could not simply seek to nullify the liability under the State Act, and for that to be permissible because that would be simply to do something indirectly which is prohibited directly.  Now, my learned friend, the Solicitor-General for the Commonwealth, has said that the Commonwealth would simply be doing something that it could do indirectly, not something that it was prohibited from doing, and it has been our contention that the restriction in 51(xiv) ought to be viewed as something which cannot be avoided indirectly, to use a neutral expression.

Your Honours, if I could just quickly then mention one other point which is the question of the scope of the power and whether it was a consequence of our submissions that the power itself, in some sense, contracted or expanded.  Our submission is that the scope of the power remains constant, but that in certain circumstances a law made in the

exercise of that power may have a restricted application, or it may be inoperative to the extent that it infringes the restriction.

We would say, just as under section 109, State laws which are inconsistent with federal laws are held invalid to the extent of the inconsistency, that is, they are held to be inoperative because of the presence of a Commonwealth law, we would say, too, here there may be that degree of contingency that because of the presence of a State law, the effect of a Commonwealth law upon the obligations under that State law render the Commonwealth law restricted in its application and render it inoperative to the extent that the Commonwealth law infringes the restriction. May it please the Court, they are the submissions in reply for the appellant.

GLEESON CJ:   Thank you.  We will reserve our decision in this matter.  We will adjourn until 10 o’clock tomorrow morning.

AT 3.41 PM THE MATTER WAS ADJOURNED