New South Wales v Commonwealth

The case of *New South Wales v Commonwealth* concerned a dispute over the payment of a gratuity to a former public servant, John Heffernan, whose department was transferred from the State of New South Wales to the Commonwealth. The State of New South Wales sought to recover from the Commonwealth the sum paid as a gratuity to Heffernan's representatives, or alternatively, a portion of that sum. The Commonwealth had deducted this gratuity payment from amounts otherwise payable to the State.

The central legal issues before the High Court were: first, whether the discretion regarding the amount of a gratuity under section 60(ii) of the New South Wales Public Service Act 1895 was vested in the State or the Commonwealth; and second, whether the Commonwealth was justified in charging the entire sum of the gratuity, or any part of it, against the State under sections 84, 89, and 93 of the Commonwealth Constitution. The Court was required to determine the nature of Heffernan's employment and the applicability of various provisions of the Public Service Act 1895 and the Constitution.

The Court reasoned that the question of whether an individual was "permanently employed" under section 60 of the Public Service Act 1895 was a question of fact, not solely dependent on formal appointment by the Governor in Council. It was held that an officer in fact permanently employed was entitled to a gratuity under section 60(ii) even if not formally appointed by the Governor, and that section 11 of the Act did not affect this right. The Court further determined that the discretion conferred by section 60(ii) regarding the amount of the gratuity passed to the Governor-General by virtue of section 70 of the Constitution. Regarding the financial charge, the Court found that the gratuity, having been paid by the Commonwealth, constituted expenditure incurred solely for the maintenance or continuance of the department at the time of transfer, within the meaning of section 89(ii)(a) of the Constitution. Consequently, by virtue of sections 89 and 93, this expenditure was wholly chargeable against the State.