New South Wales v The Commonwealth [No 1]

[1932] HCA 7

46 CLR 155

THE STATE OF NEW SOUTH WALES

THE COMMONWEALTH AND OTHERS

DEFENDANTS. [No. 1.] Constitutional Law-State debts-Agreement between Commonwealth and States for

payment by Commonwealth-Payment of interest by Commonwealth-Refusal by State to repay to Commonwealth interest paid on its behalf-Recompment by Commonwealth from State revenues-Validity of legislation authorizing such MELBOURNE, recoupment--Whether a law "for " the carrying out by the parties thereto" of the March 17, 22. Financial Agreement between the Commonwealth and the States-The Constitution (63 &64 Vict. c. 12), sec. 105 A-Constitution Alteration (State Debts) 1928 (No. 1 of 1929), sec. 2-Financial Agreement Act 1928 (No. 5 of 1928)- Financial April 6, 21. Agreement Validation Act 1929 (No. 4 of 1929)-Financial Agreements Enforce- ment Act 1932 (No. 3 of 1932), Part II.-Financial Agreements (Commonsealth Liability) Act 1932 (No. 2 of 1932).

The provisions of Part II. of the Financial Agreements Enforcement Act 1932 are a valid exercise of the legislative powers of the Federal Parliament,

So held by Rich, Starke, Dixon and McTiernan JJ. (Gavan Duffy C.J. and Evatt J. dissenting).

MOTION for Injunction.

The State of New South Wales issued a writ against the Common- wealth of Australia and the Honourable Joseph Aloysius Lyons and other Ministers of State and Assistant Ministers of State of the Commonwealth of Australia. By the indorsement on the writ the plaintiff claimed (1) a declaration that the whole of the Financial Agreements (Commonwealth Liability) Act 1932 and the whole of the Financial Agreements Enforcement Act 1932 were ultra vires the Parliament of the Commonwealth and were invalid (2) an order to

46 CLR 156

restrain the defendants, their servants and agents, from acting upon or enforcing or putting into operation the provisions of the said Acts or either of them or any of such provisions; (3) an order to restrain the defendants and each of them, their servants and agents, from causing or procuring or taking any step towards causing or procuring to be acted upon or enforced or put into operation the [No. 1].

provisions of the said Acts or either of them or any of such provisions (4) an order providing for the costs of this action; and (5) such further or other relief as the nature of the case may require. The writ was indorsed for trial without pleadings. After the issue of the writ Evatt J. granted the plaintiff leave to serve with the writ a notice that the Full Court would be moved for an interlocutory injunction restraining until the hearing of the action the Commonwealth and its Ministers of State and their servants and agents (1) from acting upon or causing or procuring or taking any step towards causing or procuring the making or publishing of or acting upon any proclama- tion under sec. 7 or any other provision of the Financial Agreements Enforcement Act 1932 in relation to New South Wales, or (2) from in any way upon the passing of the resolutions of both Houses of the Parliament under sec. 6 of the said Act making the provisions of secs. 7 to 13 inclusive or sec. 14 of the said Act apply in relation to the said State, or (3) from acting in any way under the provisions of sec. 15 of the said Act in relation to the said State.

The motion now came on for hearing before the Full Court of the High Court.

It was agreed during argument that the hearing of the motion should be treated as the trial of the action.

The States of Victoria and Tasmania obtained leave to intervene. Browne K.C. (with him Berne), for the plaintiff, in support of the motion for an injunction. The application is to restrain the Ministers of State, their servants and agents, from issuing a proclamation under sec. 7 of the Financial Agreements Enforcement Act 1932 pending the Court's determination of the validity of the Act. The Court has power to restrain the Ministers of the Crown from issuing a proclamation. If the provisions of the Act are followed, the

46 CLR 157

46 C.L.R.]

OF AUSTRALIA. Commonwealth can seize the revenues of a State without the inter- position of any judicial proceeding. The Commonwealth cannot, simply by legislation, proceed to deprive a State of revenue where the State has had no opportunity of justifying itself and without the interposition of some judicial tribunal. The only authority which can be looked to in order to justify such a proceeding is sec. 105A of the Constitution (Constitution Alteration (State Debts) 1928, sec. 2). Sec. 105A (5) makes the Financial Agreement a binding agreement both on the States and on the Commonwealth. This Agreement is enforceable in the same way as any other agreement. [Counsel referred to The Commonwealth v. New South Wales 1.] Secs. 64-66 of the Judiciary Act 1903-1927 were provisions whereby sec. 105A of the Constitution was made applicable for enforcing contracts between States and the Commonwealth. As to claims between the Commonwealth and a State the ordinary machinery of the Courts is provided, and that should have been resorted to by the Commonwealth. In sec. 105A of the Constitution the expression

'carrying out" means performing, and not "enforcing," the agreement, and does not extend to punishment or seizure of revenue. The States exist under a system of responsible government, and under the present legislation the Commonwealth may, without hearing a State, render it unable to carry on its essential services. Sec. 105A does not provide a new method of enforcement but deals with carrying out the agreement by all the parties. This may relate to the performance of numerous minor matters which might arise during the period of fifty-eight years, which is the duration of the Agreement. It is not reasonable that the whole scheme of judicial enforcement should be superseded by the few words in sec. 105A. If sec. 105A is to have the meaning claimed for it, it would be expected that the matter would have been stated with greater explicitness than was used in that section. As soon as the resolution under sec. 7 of the Financial Agreements Enforcement Act is published the moneys specified become payable to the Treasurer of the Commonwealth. The resolution covers all persons liable to pay money to the State of New South Wales. When the proclamation is published under sec. 7 of that Act, the Act diverts the specified

1(1923) 32 C.L.R. 200. 46 CLR 158

revenue, which should have been paid to the New South Wales Treasury. The Auditor-General of the Commonwealth does not represent the States at all, and to his arbitrament the States have never assented, and it is on his statement that the whole proceedings are founded, and it is on his statement that the people of New South Wales are not to pay taxation to the State or to any State official. [No. 1].

To make the Act go on operating, nothing is necessary but certificates from the Auditor-General of the Commonwealth which may be issued indefinitely, and the intervention of Parliament is not even necessary. While the proclamation is current the whole revenue of the State may be intercepted on the mere issue of certificates of the Commonwealth Auditor-General. Apart from sec. 105A of the Constitution there is no power which can support such legislation. [Counsel referred to the Financial Agreement Validation Act 1929 and the Financial Agreement Act 1928.] The Constitution of the Commonwealth is divided into legislative, executive and judicial functions, and placitum 51 of the Constitution delimits the powers of the Commonwealth Parliament, and these powers are subject to the Constitution. The States knew that they were dealing with the Commonwealth, whose Constitution provided that its judicial power was to be vested in Courts. The States knew that disputes had been enforced by judicial process in the Courts. Those powers were limited to the judicial powers conferred by the Con- stitution. The Commonwealth Parliament never had power to enforce agreements to which it might be a party except through a judicial tribunal, and all the parties would assume that if there were to be any question of enforcement it would be by judicial process (New South Wales v. The Commonwealth 1 ). Not only were the States dealing with that Constitution, with whose methods of judicial process they were acquainted, but all the States were States with responsible government (Amalgamated Society of Engineers v. Adelaide Steamship Co. 2 ). The dispute is one between the Commonwealth, on the one hand, and States with responsible government, on the other. It is not enough to remember that the States are co-equal with the English Parliament: but it is necessary to remember that the Parliament of a State is the

1(1915) 20 C.L.R. 54. 2(1920) 28 C.L.R. 129. 46 CLR 159

only authority that can appropriate the revenue of that State. Sec. 75 (III.) of the Constitution is the only authority which empowers the Commonwealth to sue a State (The Commonwealth v. New South NEW SOUTH Wales 1 After judgment is obtained under sec. 75, enforcement of that judgment is dealt with by sec. 64 et seqq. of the Judiciary Act. This procedure might have been followed to enforce the Financial Agreement. That was the state of the law at the date of the Financial Agreement with regard to agreements to which a State is a party. There is an implied term of the Agreement that if moneys are required to give effect to the Agreement such moneys can only be appropriated by Parliament itself (Australian Railways Union V. Victorian Railways Commissioners 2 ). Even if the State had been sued by the Commonwealth, the Judiciary Act provides how that judgment is to be enforced. Even if judgment were obtained against the State, the provision of money to meet that judgment was, in the last instance, in the hands of the State. If there is always that condition, still more must that be SO where a party does not follow the procedure of suing and getting a judgment. It must always be in the hand of the State Parliament to provide the money. In this case there is no judgment, but only the certificate of the Auditor-General (Churchward v. The Queen 3 ). When a person contracts with a State having responsible government, it contracts on the basis of Parliament finding the money to meet the liabilities of such State arising under such agreement. If a bargain had been made giving to the Commonwealth such power as the Commonwealth claims, it is difficult to believe that the agreement, if made, was couched in the language used in the Act (Rayner v. The King 4 ). If the wide meaning contended for is to be given to sec. 105A of the Constitution, it, in effect, repeals secs. 39 and 46 of the Constitution Act of New South Wales and will enable the Commonwealth Parliament to amend or repeal the New South Wales Constitution, which is a consequence not to be expected. Time after time in Acts of the Commonwealth Parliament there occurs a provision, generally towards the end of the Act,

1(1923) 32 C.L.R., at p. 212, 2(1930) 44 C.L.R. 319. at pp. 352, 3(1865) L.R. I Q.B. 173, at p. 209. 4(1930) N.Z.L.R. 441. at p. 457. 46 CLR 160

that the Governor-General may make regulations for carrying

out or giving effect to provisions of the Act. It was for such purposes as these that the words "for the carrying out," &., were inserted, namely, to carry out matters which had not been worked out in detail or which had not been completely dealt with. It was that kind of thing that the parties had in mind when they used [No. 1].

those words, particularly in view of an agreement of this nature lasting for fifty-eight years. It is not an apt form of words to carry something far more important and that may be subversive of the whole of the Constitutions of the States. If the parties to the Agreement had meant to give effect to such a drastic change, it would have been more clearly expressed. The interpretation sought to be put on this Agreement enables the Commonwealth to make laws imposing obligations on the other party to pay money to the Commonwealth. There is nothing in the Agreement which comes within reasonable distance of that. One consequence of the Act is that it imposes obligations on persons not parties to the Agreement, namely, the citizens of New South Wales. The parties to the Agreement must have known that there was machinery existing which would enable the parties to enforce the Agreements.

[STARKE J. referred to Gibson v. Mitchell 1.] The narrower meaning should be given to the clause (Caron V. The King 2 ). It must have been within the contemplation of the parties that the States would continue to exist as States, and that one party was not to exercise its powers SO as to destroy the other.

C. Gavan Duffy, for the States of Victoria and Tasmania intervening. Sec. 6 of the Financial Agreements Enforcement Act is distinct from the rest of the Act, which contains machinery provisions. The Act is ultra vires altogether whether the process of execution is put into operation before or after judgment. If there were a plain, definite power given to the Commonwealth, it would not matter what hardship was imposed on the States or their subjects: but the hardship of these provisions should not be entirely overlooked.

1(1928) 41 C.L.R. 275. 2(1924) A.C. 999, at pp. 1003, 1006. 46 CLR 161

46 C.L.R.]

OF AUSTRALIA. because the harshness of the results throws some light on the inter- pretation to be put on this clause. Sec. 15 would enable a mode of execution hitherto unknown in any British community for the enforcement of a judgment debt. That section, as it stands, could not be within the most extensive power to enforce payments by States. Sec. 105A of the Constitution is the only power which can be relied upon. Sec. 105A, without some ancillary power, cannot possibly be sufficient, because the power given is to make laws for carrying out any such agreement, and what is ordained by the Financial Agreements Enforcement Act certainly is not carrying out the agreement between the parties. Intercepting money before it reaches the hands of the State is no part of carrying out the I agreement made. The parties never agreed to such means of enforcement. Neither is there a necessary implication. In the case of subjects, if the Commonwealth were given power to make laws for carrying out a contract, there would be an implication to do what was here done in the case of an individual on the breach of contract. While such an implication may be properly made in the case of subjects, it cannot be made in respect of an agreement made between the Commonwealth and the States. In order to say what implication should be made it is proper first to look at the words of the power, but to look at those words in the light of the reason for the grant of the power and for the change of the Constitution, &. There is one circumstance which should be given close attention; that is, that this change in the Constitu- tion is a very unusual one. Another reason why the Court should not imply this power is that up to the time when this section came into operation there was no case in which execution was leviable against the State. That judgment against a State could be enforced by way of execution was unknown (Australian Railways Union v. Victorian Railways Commissioners 1 ). No express power can be called in to support the Federal Act. An ancillary power must be relied upon. In considering power, whether express or implied, it is proper to go to the surrounding circumstances, and here the important matter is the genesis of the Agreement. The Agreement is one imposing obligations: when power to carry

1(1930) 44 C.L.R. 319. 46 CLR 162

OF A. out the Agreement is given, would that mean power to enforce the

Agreement as is given by this Act ? This Act gives power to the Commonwealth to choose which of the States were to be coerced into compliance. Powers which can properly be regarded as incidental depend very much on the circumstances of the case (State of Tasmania v. The Commonwealth and State of Victoria 1 ) [No. 1].

Apparently it was thought that the Commonwealth must have power to make laws to carry out the Agreement. It would be consistent with the language of the Act merely to enable the Commonwealth to make such laws as were necessary to enable the parties to carry out the Agreement. It may be that it was thought that if the Commonwealth was permanently to take over the debts of the States some laws would be necessary to enable these permanent steps to be taken. Therefore, it was thought important that the Agreement should be permanently carried out. So this change in the Constitution was made. It would be stretching the words of sec. 105A to say that the Agreement could not be enforced without compulsive powers. It might be convenient to have them, but the Agreement could be carried out without them. The words of sec. 105A are capable of being aimed at more than one object. Even if the words of sub-sec. 3 are such that it would be reasonable to infer remedies for breach of contract, that ought not to be done in the case of a State. The state of the law in force at the time of the Agreement and of the alteration in the Constitution should be taken into consideration. One of the important matters in the State Constitution was complete control by the State over its own finances. Process to seize State revenue and process to satisfy obligations are unknown in Victoria and in England. Before such power should be implied very plain words must be found. If power to execute against revenues of the State is given it must be granted in express terms. Australian Railways Union v. Victorian Railways Commis sioners 2 shows a strong leaning towards the view that a power to enforce awards against a State under the arbitration powers is void. This shows that there should not be implied an ancillary power to give relief when one of the parties has broken the contract. If such power were to be implied, it would be much easier to imply

1(1904) 1 C.L.R. 329, at p. 338. 2(1930) 44 C.L.R., at p. 352. 46 CLR 163

it in the case of the Railways Union than in the present case. Sec. 105A 3 of the Constitution should not be read as giving any compul- sive power at all. Its natural meaning, in the circumstances, is such that it does not include any compulsive power at all, and the circumstances surrounding it are such that the Court should not imply any compulsive power. If all these reasons were not sufficient to induce the Court to say that the compulsive powers should not be implied, there is another reason, namely, that under sec. 106 of the Constitution there are rights preserved to the States and before these rights are taken away, i.e., before the power of the State to control its own revenue is taken to be overridden by some Federal power, that power ought to be clearly expressed in the Federal Constitution. Even if sec. 105A (3) enables execution to be enforced it does not enable the Federal Parliament to discriminate between different parties to the Financial Agreement. If any power to effect execution were given, such power was given only to make general rules for enforcing execution. Sec. 5 of the Financial Agreements Enforcement Act shows that enforcement of the Act depends on a judicial finding. When proceedings are taken otherwise than under sec. 6, it is necessary to approach the Court before anything can be done but under sec. 6 a State's property may be interfered with without the intervention of the Court at all. In the case of sec. 6 the duty entrusted to the Auditor-General is a judicial duty. The Commonwealth has based its whole proceedings upon obtaining a decision of the Auditor-General, and the giving of his certificate is a judicial proceeding (R. v. Electricity Commissioners; Ex parte London Electricity Joint Committee Co. 1 Williamson V. Ah On 2 Ex parte Walsh and Johnson: In re Yates (3) ).

E.M. Mitchell K.C. and Wilbur Ham K.C. (with them O'Bryan), for the defendants, to oppose the motion.

E. M. Mitchell K.C. The first question to consider is the correct construction of sec. 105A (3) of the Constitution. The Financial Agreement was the largest, and involved the greatest, amount of

3(1925) 37 C.L.R. 36, at p. 50. 1(1924) I K.B. 171, at p. 206. 2(1926) 39 C.L.R. 95, at pp. 108, 122, 123. 46 CLR 164

money of any transaction ever entered into in Australia, and involved both the internal and the external debts of the States. Not only did the Commonwealth assume liability for those debts, but it was also bound to arrange for redemptions, conversions, consolidations and renewals after it took over the obligations of the States. Is it reasonable that the Commonwealth should have taken over all [No. 1].

those liabilities without having any recourse to the States-leaving the States in a position that they would pay if they chose? In the construc- tion of this sub-section, is it to be assumed that the Commonwealth has taken over these large responsibilities without any right to recoup itself against the States ? The Commonwealth is bound to meet the obligations of any State to maintain the credit of the other States in Australia. In return for assuming these obligations the Commonwealth received the States' promises that they would pay interest. The words in sec. 105A (5) " every such agreement

shall be binding upon the Commonwealth and the States" mean that the Agreement shall be obligatory and enforceable. This clause places the Agreement above the Constitution and above the States: whatever clauses there are in this Agreement, if they involve payment of money, they are obligatory and binding notwith- standing anything in the Constitution of the Commonwealth or of the States. Whether the State Parliament appropriates or does not appropriate money to meet its obligations has no effect on this Agreement at all. Sec. 105A (3) should be construed as supporting the compulsive or coercive powers. Sec. 105A (3) includes power to pass laws for the enforcement of the Agreement against both States and Commonwealth, and it is not unreasonable that the States should give power of enforcement to the Commonwealth. It was almost necessary that the Commonwealth should have some powers to enforce redress, and, assuming that some right of redress and enforcement was contemplated, it would in the circumstances of the case be left to the Commonwealth. If sec. 105A (3) does not embrace measures for enforcement, then it has very little value or meaning. If sec. 105A (3) relates only to matters incidental to carrying out the Agreement, it was not necessary because the incidental powers of the Constitution enable the Commonwealth Parliament to legislate for anything incidental on its part, and the

46 CLR 165

States can pass laws to carry out the incidental powers on their part. In view of the huge responsibilities the Commonwealth took over, it is incredible that the Commonwealth would leave itself without any means of enforcing the Agreement, and if the Common- wealth had to depend upon an appropriation by a State before it could recover, it might have no remedy to set off against the liabilities of the States which it had undertaken. When the amend- ment of the Constitution was considered, it is probable that the case of Commonwealth of Virginia v. State of West Virginia 1 was in mind. Sec. 5 of the Financial Agreements Enforcement Act added new remedies which are in aid of the judicial power. The certificate of the Auditor-General is merely a matter which is brought to Court in order to facilitate proof. That section simply added new remedies. The words of sec. 5 are apt to indicate one thing only, namely, that carrying out by the parties means performance by the parties. If

"performance" were used instead of "carrying out," it would not be reasonable to attribute any other meaning than that contended for. In the circumstances of the case and on the text of the language any other meaning than 'performance of obligations " would not satisfy the words of the section. Sec. 105A of the Constitution makes the Agreement binding; if it is binding it is enforceable, and its primary meaning covers performance by the parties of their obligations. The powers of enforcement given by sec. 105A (3) are not limited to the actual terms of that section. Sec. 105A is free from the objection that State revenue cannot be intercepted without parliamentary appropriation. The Financial Agreements Enforcement Act also comes within the incidental power of sec. 51 of the Constitution for the purpose of making effective the judgment of

the Court. Sec. 6 of the Financial Agreements Enforcement Act resembles the old writ of extent. If sec. 105A (3) includes a power to enforce, it includes a power to make a law to enforce in this way, and includes means which are appropriate and usual. It may be important to consider whether the means adopted were a well-known means (R. v. Hornblower 2 ).

Wilbur Ham K.C. A general view of sec. 105A of the Constitution, and more particularly of sub-sec. 3, must be taken at the outset.

1(1918) 246 U.S. 565, at pp. 601, 603. 2(1822) 11 Price 29, at pp. 45, 46. 46 CLR 166

The questions which arise in this case are as follows :--- As to the words "carrying out" in sec. 105A (3)-is the sub-section

SOUTH confined to incidental matters to implement the Agreement, or does

it extend to coercive measures that when given effect to will result in the Agreement being carried out ? (2) As to the words " by the parties"- -must the laws operate directly on the parties [No. 1].

only, i.e., some supposed entities properly described as "the King in right of the State," or does it extend to the people of the States who in their political organization have agreed to become parties to the Agreement ? (3) If the power is coercive, will the Courts examine the wisdom, justice or policy of the means adopted by the Legislature ? (4) Are coercive measures limited to proceedings in Courts and attempted execution of judgments ? (5) Are measures of execution prior to a judicial determination of right SO unusual as to be excluded from the general power ? (6) Does the Act purport by the Auditor-General's certificate to determine the State's liability or the quantum of the Commonwealth's rights, or does it merely limit the amount of money it may take in charge pending the determination of its rights by the Courts ? (7) Does not the Agreement itself, by Part IV., clause 1, provide that the Auditor General's certificate is to be conclusive as to the "amount and matter" stated in the certificate ? (8) Is there any attempted usurpation of judicial power -this is intended to cover both "persons" and "matter." (9) Is there any unauthorized invasion of the States' Constitutions ? (10) If sec. 105A (3) is limited to measures to implement the Agreement and provide in detail for what is provided for in the Agreement itself only in general terms, does not the Enforcement Act SO provide for the indemnity contained in Part IV., clause 3, of the Agreement ? As to questions 1 to 3- The only means of paying the bondholders was out of revenue, by collections and due payment by the States. No incidental power is called for to enable the Commonwealth merely to implement this Agreement. All incidental powers were given by secs. 105A (1) and 105A (5) and sec. 51 (xxxix.). The Commonwealth must have recog. nized that it would be necessary to repose in some body a power to compel performance of the Agreement. These provisions cannot be made permanently effective unless there is somebody in whom there

46 CLR 167

46 C.L.R.]

OF AUSTRALIA. is the power to enforce compliance. Effective performance is to be secured by the means adopted to "carry out the Agreement (Mur- ray's Lessee v. Hoboken Land and Improvement Co. 1 ). Coercive powers are only one means of securing effective performance (Virginia V. West Virginia 2). The Virginia Case shows that the words" carry out' are wide enough to cover effective means to coerce performance. Sec. 105A (3) presupposes an agreement made, i.e., a valid agreement made, and provides that laws may be made for carrying it out. This cannot be construed as directed to enabling the Federal Legislature to pass a law authorizing the Commonwealth or the States to enter into an agreement, or ratifying one entered into. Therefore sub-sec. 3 goes beyond mere authorizing or validating an agreement. The Commonwealth is under a legal obligation to pay the bondholders under the Agreement itself and also under sec. 105A (5). The bondholders could sustain an action against the Commonwealth under this sub-section. But even if not liable to the bondholders, the Commonwealth was under a legal obligation to the States to pay the bondholders, and this is not subject to a condition precedent that the States pay. Repudiation by one party is not a ground for the Commonwealth rescinding its part of the Agreement. Coercive measures are just as much for the benefit of the States as for the Commonwealth, i.e., money must be found from other States to meet the defaulting State's liabilities. The only protection to the other States is that the Commonwealth should be able to enforce the contract against the recalcitrant States. The Commonwealth is the only available person to have a power of enforcement, and the words used are apt to express this power. The words of sec. 105A (3) are intended to describe not the persons who are to be affected but the area over which the laws are to be effective. The operation of the laws of the Commonwealth covers the citizens of the States. The Commonwealth Parliament has passed no laws to carry out incidental matters, but it has passed laws to carry out a variation of the Financial Agreement, which variation actually affected all the itizens of all the States. This is not a claim for damages for breach of contract, but is an attempt to compel performance. As to questions 4 and 5-Distress is a well known extra-judicial remedy

1(1855) 18 Howard 272, at p. 281, 2(1918) 246 U.S., at p. 601. 46 CLR 168

(see Halsbury, vol. XI., pp. 117, 217, 218; Willoughby on the

Constitution of the United States, 2nd ed., vol. III., p. 1883; King V. Mullins 1 Murray v. Hoboken 2 ). If the certificate of the Auditor-General was erroneous the action would not be justified and the State would have its full remedy. If it is right there would be no wrong and, therefore, no remedy (Phillips v. Commissioner of [No. 1].

Internal Revenue 3 ). There being a complete obligation on the States to pay this money, if the Commonwealth is only entitled as against the States to get a judicial obligation to pay imposed it only gets one right substituted for another right. This extra judicial method has been applied in America against bank accounts (Freund on Administrative Powers over Persons and Property, ch. X., at pp. 197, 200, 568). As to the application of the writ of extent in England, see Encyclopodia of the Laws of England, 2nd ed., vol. V., pp. 628-629. These cases illustrate the Crown's remedy to collect money where comparatively small sums of money are involved. This is a far less stringent procedure than a writ of extent. Sec. 6 of the Act is intended only to be a complement of sec. 5 in cases of urgency and where there is a danger of the Crown's remedy being lost unless some steps are taken to protect the Crown's remedy. Similar provisions are con- tained in the Customs Act 1901-1923, secs. 167, 203, 228-230, and the Excise Act 1901-1923, secs. 93, 96, 97, 116. As to ques- tion 6-The words "judicial power" are defined in Huddart Parker &Co. Pty. Ltd. v. Moorehead 4, cited in Shell Co. of Australia v. Federal Commissioner of Taxation 5. The Auditor- General's certificate is merely something which informs the Govern- ment of the default and the amount of it, and limits the amount of money which may be taken in charge pending the determination of the matter by the High Court. The Auditor-General is concerned to look only at the Financial Agreement, and he is not to take into account matters such as set-off as long as it does not arise under the Agreement. Sec. 5 of the Act is not invalid because there is attached to it a novel method of executing a judgment of the High

1(1898) 171 U.S. 404, at p. 413. 2(1855) 18 Howard, at pp. 275, 3(1931) 283 U.S. 589, at p. 595. 4(1909) 8 C.L.R. 330. 5(1931) A.C. 275, at p. 295; 44 277-278, 280, 281-283. C.L.R. 530, at p. 542. 46 CLR 169

Court, and the steps referred to in sec. 5 are incidental to the judicial power and authorized under sec. 51 (XXXIX.) of the Con- stitution. So far as the steps are authorized by sec. 6 they are also incidental to the executive power. In the ordinary course of executing any judgment it is in the hands of the Executive to say how the judgment is to be executed. The actual enforcement of a judgment is carried out by the executive arm, and sec. 5 is no more than an attempt to give a more effective procedure for carrying out a power that would otherwise be in the hands of the Executive. The Auditor-General's certificate does not give any right at all. It is only prima facie evidence and there is no attempt to make it con- clusive. As to question 7-It is clear that each State should pay to the Commonwealth the amounts paid by the Commonwealth on behalf of the States. Part IV., clause 1, of the Financial Agreement goes beyond the heading, and it is not limited by that (Union Steamship Co. of New Zealand v. Melbourne Harbour Trust Commissioners 1 ). As to question 8-There is no usurpation of judicial power and no judicial power is vested in any person other than the Court. As to question -There is no unauthorized invasion of the State Constitu- tions (Australian Railways Union v. Victorian Railways Commis- sioners 2 ). Sec. 105A makes the Financial Agreement binding notwithstanding anything in the Federal Constitution or in the Con- stitutions of the States. As to question 10-An indemnity is given, and the Enforcement Act provides in detail for an indemnity by the Commonwealth. Unless the Agreement can be enforced the Commonwealth would have to borrow to meet the liabilities of the defaulting State. It could not free itself from this liability, and the whole of the burden would be thrown on the Commonwealth and the remaining States indefinitely. The Commonwealth is under a legal liability to the States to pay, whether it is under a legal liability to the bondholders or not. The true position is that the grant of judicial power carries with it, as implied in the grant, power to execute its judgments, and so far as that implied power is concerned it may be that the persons who are executing that judgment may not be officers of the Court. Where, as in sec. 51 (XXXIX.) of the Constitu- tion, there is power to pass laws incidental to legislation, the execution

1(1884) 9 App. Cas. 365, at p. 369. 2(1930) 44 CL.R. 319. 46 CLR 170

of such laws necessarily falls on the executive officers of the Common- wealth. The incidental powers of the Constitution can be used to support these provisions (R. v. Kidman 1 ). There is, by a mere grant of the power, everything which is necessary for the proper exercise of the function (Griffin v. South Australia 2; Stemp v. Australian Glass Manufacturers Co. 3; Le Mesurier [No. 1].

V. Connor 4 ). Not only has the Court power to execute its own judgments but under the Constitution it is part of the duty of the Legislature to execute its laws. The Court is not restricted by the preamble, and the name of the Act, &., in construing it, and can call in aid powers other than those in sec. 105A (3) (Ex parte Walsh and Johnson 5 ). There is an absolute obligation on the Commonwealth to make these payments, and there is no condition precedent to that liability that the States shall pay.

Browne K.C., in reply. C. Gavan Duffy, by leave, referred to the following cases Stemp V. Australian Glass Manufacturers Co. 6 State of Tasmania V. The Commonwealth and State of Victoria 7 Australian Railways Union v. Victorian Railways Commissioners 8; Alcock V. Fergie 9; Fisher v. The Queen 10; Manchester Ship Canal Co. v. Manchester Racecourse Co. 11.

Cur. adv. vult.

GAVAN DUFFY C.J. The Court has considered this case and has reached a conclusion which I shall now state. The mem- bers of the Court will give their reasons on a later date. Evatt J. and I are of opinion that Part II. (Enforcement against State Revenue) of the Financial Agreements Enforcement Act 1932 is invalid. Rich, Starke, Dixon and McTiernan JJ. are of opinion that

1(1915) 20 C.L.R. 425, at pp. 2(1924) 35 C.L.R. 200, at pp. 205, 3(1917) 23 C.L.R. 226, at pp. 241, 4(1929) 42 C.L.R. 481, at p. 497. 5(1925) 37 C.L.R., at pp. 61, 108, 217 ; (1903) A.C. 158, at p. 167. 110, 126-127, 134. 6(1917) 23 C.L.R., at p. 233. 440-441, 449, 457. 7(1904) 1 C.L.R., at p. 338. 8(1930) 44 C.L.R., at pp. 336, 352, 9(1867) 4 W.W. &a'B. (L.) 285, 10(1900) 26 V.L.R. 781 ; 22 A.L.T. 11(1900) 2 Ch. 352, at p. 359. 46 CLR 171

Part II. (Enforcement against State Revenue) of the Financial Agreements Enforcement Act 1932 is a valid law of the Common- wealth and that no declaration of invalidity should be made as NEW claimed by the writ.

Subsequently the following written judgments were delivered

GAVAN DUFFY C.J. The Parliament of the Commonwealth, purporting to exercise the power conferred on it by sec. 105A (3), has enacted a statute, No. 3 of 1932, which enables the Common- wealth, on the failure by any State to make a payment prescribed by the "Financial Agreements " defined in the statute, to take from the taxpayers of that State moneys payable by them to the State in satisfaction of the payment which the State has failed to make. Sec. 105A is as follows:- (1) The Commonwealth may make agreements with the States with respect to the public debts of the States, including-(a) the taking over of such debts by the Common- wealth: (b) the management of such debts; (c) the payment of interest and the provision and management of sinking funds in respect of such debts; (d) the consolidation, renewal, conversion, and redemption of such debts; (e) the indemnification of the Commonwealth by the States in respect of debts taken over by the Commonwealth and (f) the borrowing of money by the States or by the Commonwealth, or by the Commonwealth for the States. (2) The Parliament may make laws for validating any such agreement made before the commencement of this section. (3) The Parliament may make laws for the carrying out by the parties thereto of any such agreement. (4) Any such agreement may be varied or rescinded by the parties thereto. (5) Every such agreement and any such variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State. (6) The powers conferred by this section shall not be construed as being limited in any way by the provisions of section one hundred and five of this Constitution."

It will be observed that sub-sec. 1 authorizes the Commonwealth to make certain agreements with the States, but does not pretend

46 CLR 172

A. to authorize the States to make agreements with the Commonwealth

The States must be authorized by their respective Parliaments. Sub-sec. 4 permits the parties to an agreement to vary or rescind it If any such agreement is made, sub-sec. 5 provides that it shall be binding upon the Commonwealth and the States parties thereto, notwithstanding anything contained in the Constitution of the [No. 1].

Commonwealth or of the several States or in any law of the Parlia ment of the Commonwealth or of any State. In my opinion the operation of sub-sec. 5 is this: If the Commonwealth and the States have in fact made an agreement the sub-section makes that agreement valid though the parties or some of them had in fact no authority to make the agreement and it preserves the valid existence of the agreement unless it is varied or rescinded under the provisions of sub-sec. 4. It does not alter the nature or incidents of the agreement, or affect the rights, obligations and duties of the parties under the agreement while it continues to exist. Let us now turn to sub-sec. 3. It is said that the sub-section authorizes the enactment of the statute in question because the statute merely compels one of the parties to an authorized agreement to carry out its obligations under the agreement. My first answer to this contention is that the statute does not merely SO compel. It furnishes the Commonwealth with means of obtaining from taxpayers who are no parties to the agreement moneys equivalent in amount to that which would have been received by the Commonwealth from the State had it not failed to perform its obligations under the agreement. But there is another answer. The sub-section does not authorize any coercion of the parties to the agreement. Sub-sec. 1 permits the Common- wealth to make contracts which may require parliamentary authority to enable the parties to carry them out conveniently, effectively, or at all. If such parliamentary authority is required, sub-sec. 3 permits it to be given by one particular Parliament, and that, the Parliament of the Commonwealth. It is to be observed that the laws authorized by sub-sec. 3 are laws for the carrying out by the parties thereto of any such agreement. The Commonwealth is in every case such a party, and if the sub-section authorizes an enforce- ment against the States it must also authorize an enforcement against the Commonwealth by its own Parliament - a curious

46 CLR 173

position. The truth is that the language of the sub-section is not apt to include a statute enforcing obligations against any of the parties to an agreement. It is also said for the Commonwealth that the statute which its Parliament has enacted may be supported by invoking other powers than that conferred by sec. 105A (3). The Commonwealth Parliament possesses a number of distinct powers, and if it does not specify which of those powers it proposes to exercise in any enactment, the validity of that enactment may be established by invoking any one or more of those powers. But if Parliament chooses to exercise one power, and one power only, its enactment cannot be supported by invoking another power. In this case it is clear to me from the recitals in the statute itself that Parliament intended to exercise the power conferred by sec. 105A (3), and that power only and it is not for us to say whether it would have been willing or not to exercise any other power if in fact it has not done so. But, as the other members of the Court have debated whether the statute in question is within any of the powers of the Commonwealth, I think it right to say that, in my opinion, having regard to the construction which I have already put on sec. 105A (5), no power is to be found in the Commonwealth Parliament to enact any substantial part of the statute.

I think the plaintiff is entitled to a declaration, but, as the decision of the Court is that the action should be dismissed, it is unnecessary for me to discuss what should be the exact nature of that declaration.

RICH AND DIXON JJ. Sec. 5 of the Financial Agreements Enforce- ment Act 1932 provides, in effect, that the Auditor-General shall certify to the Treasurer an amount of money then due and payable and unpaid by a State to the Commonwealth under or by virtue of the Financial Agreements, and that, after publication of the certificate in the Gazette, the Attorney-General may apply in a summary way to this Court for a declaration that the whole or part of such amount is due and payable and unpaid by the State to the Commonwealth. Such a declaration is to be enforceable as a judgment, and shall, in addition to any other remedies for enforcing such judgment by law provided, operate as a charge upon all the

46 CLR 174

revenues of the State." The section then provides that a resolution may be passed by both Houses bringing into operation sees. 7-13 of the Act in relation to revenues of the State which are specified in the resolution. Thereupon those sections shall, to the extent of the amount SO declared by the Court, apply in relation to the State The effect of secs. 7-13 is to create an involuntary assignment of [No. 1].

the specified revenues of the State to the Commonwealth during a period commencing at a date fixed by proclamation and ended by a proclamation. The revenue becomes payable to the Treasurer of the Commonwealth payment to the Treasurer of the Common- wealth by a person liable to the State operates as a discharge of his liability to the State; the Commonwealth may sue persons liable to the State in respect of any of the specified revenue no moneys owing in respect thereof may be paid to the State, and such a payment if made shall not operate in discharge of the liability it is made an offence for a Minister or other officer of a State to receive or permit to be received any such moneys or to give an indemnity in respect of any such payment. The Commonwealth is required to apply the net amount which it receives after payment of the expenses of collection in discharge of any liabilities of the State which have accrued under the Financial Agreements, and to refund to the State any amount received by the Treasurer under the Act in excess of the liabilities of the State to the Commonwealth. When the liabilities of the State are discharged, the Auditor-General shall

SO certify to the Treasurer, and thereupon a proclamation to that effect shall be issued by the Governor-General, and the period in which the provisions of secs. 7-13 apply shall cease.

In our opinion these provisions are valid. We think that they are within the power conferred upon Parliament by sec. 105A (3) of the Constitution, and we also think that they are within the power derived by the Parliament from the operation of secs. 75 (III.), 51 (XXXIX.), and possibly sec. 78, combined with sec. 105A (5) Sec. 105A was inserted in the Constitution by a proposed law approved by the required majority of the electors on 17th November 1928 and afterwards assented to. The amendment was passed by the Parliament and submitted to the electors in pursuance of the Financial Agreement made on 12th December 1927 between the

46 CLR 175

Commonwealth and the States, clause 2 of Part IV. of which provided that the Commonwealth would take the necessary action to submit to the Parliament and to the electors proposals for the alteration NEW of the Constitution in the form in which sec. 105A now stands. By that Agreement the Commonwealth agreed to take over the balance unpaid of the gross public debt of each State, and, in respect of the debts taken over, to assume as between the Commonwealth and the States the liabilities of the State to bondholders. The Common- wealth agreed to pay to bondholders from time to time interest payable on the public debts of the States taken over. Towards the interest payable by the States in each year it agreed to provide certain amounts, and each of the States agreed to pay to the Common- wealth the excess over the amounts SO provided necessary to make up the interest charges on its public debt taken over by the Common- wealth. The Commonwealth and the States agreed to establish a sinking fund to answer the public debts taken over, and agreed that the contributions which they each undertook to make should be debts payable to the National Debt Commission. Each State agreed with the Commonwealth that it would by the faithful performance of its obligations under the Agreement indemnify the Commonwealth against all liabilities whatsoever in respect of the public debt of that State taken over by the Commonwealth. The Agreement further contained provisions for the control of future borrowing bv the States and the Commonwealth, and of the conversion, renewal, redemption and consolidation of the public debts of the Commonwealth and of the States. As a consequence of these provisions any new securities required, whether upon a conversion or renewal of an existing loan or because of further borrowing, would be issued upon the credit of the Commonwealth. Inasmuch as the terms of this Agreement did not conform with sec. 105 of the Constitution, it was necessary before its permanent provisions could become operative that the powers of the Commonwealth should be increased. The Constitu- tions of the States contained nothing to prevent them, with the authority of their Legislatures, from entering into and carrying out the Financial Agreement. But under the Constitution of each of the States the pecuniary obligations of the States cannot be answered

46 CLR 176

out of the consolidated revenue except under parliamentary appro-

priation. The general doctrine is that all obligations to pay money undertaken by the Crown are subject to the implied condition that the funds necessary to satisfy the obligation shall be appropriated by Parliament. Indeed, opinions have been expressed in this Court that, in the absence of any provision in the Commonwealth Constitu- [No. 1].

tion authorizing an impairment of this constitutional principle embedded in the Constitution of the States, legislative powers confided to the Commonwealth Parliament by sec. 51 of the Federal Constitution which otherwise extend to the operations of the States do not authorize the imposition upon the States of obligations which are not subject to the condition that funds shall be appropriated by the Parliaments of the States (see Australian Railways Union V. Victorian Railways Commissioners 1 ). If the liabilities which the States incurred to the Commonwealth under the Financial Agreement be subject to this condition, the power of the Commonwealth to exact payment would depend upon the action of the State Legisla- tures. No doubt the Commonwealth might maintain a suit to enforce such an obligation in this Court; for the matter would be one in which the Commonwealth was a party (sec. 75 (III.) ). But the obligation to be enforced would be conditional, and no judgment pronounced in accordance with the obligation could defeat the condition. The power conferred upon the Parliament by sec. 51 (xxxix.) to make laws with respect to matters incidental to the execution of any power vested by the Constitution in the Federal Judicature clearly authorizes laws for carrying into execution all the judgments which the judicial power has power to pronounce (per Marshall C.J., Wayman v. Southard 2 ). But this would not authorize the Legislature to disregard the condition of the obligation which has passed into the judgment and enforce it as if it were unconditional. On the other hand, if the obligation incurred to the Commonwealth by the States be unconditional, and the Constitution of the State impose no obstacle to the assumption of an obligation which is absolute and independent of parliamentary appropriation, we can see no reason why judgment should not be given according

1(1930) 44 C.L.R., at p. 352, per Isaacs C.J., and at p. 389, per Starke J. 2(1825) 10 Wheat, 1, at p. 22. 46 CLR 177

to the nature of the obligation, and why a law should not be made by the Parliament for the enforcement against the State of such a judgment. It is true that secs. 65 and 66 of the Judiciary Act 1903-1927 recognize the principle that the liabilities of the Crown in right of the States are subject to parliamentary appropriation of funds. This accords with the general character of the liabilities of the States usually put in suit. But we can see no reason why, if liabilities of an absolute nature are incurred by the States, the Commonwealth Parliament should not make a different provision. These considerations appear to us to be material to a proper under- standing of the constitutional alterations effected by sec. 105A. Sub-sec. 5 of that section provides with respect to agreements of the description contained in sub-sec. 1 that every such agreement and any variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution, or the Constitution of the several States, or in any law of the Parliament of the Commonwealth, or of any State. In our opinion the effect of this provision is to make any agreement of the required description obligatory upon the Commonwealth and the States, to place its operation and efficacy beyond the control of any law of any of the seven Parliaments, and to prevent any constitutional principle or provision operating to defeat or diminish or condition the obligatory force of the Agreement. In the case of the States there is no constitutional qualification of the binding force of such an agreement to which the words 'notwith- standing anything contained in

the Constitution of the several States" could more directly relate than that which requires parlia- mentary appropriation of funds to satisfy the condition upon which the liabilities of the States are incurred. In our opinion it follows that the Parliament can, in the exercise of the power given by sec. 51 (XXXIX.), enable this Court, in a proceeding by the Commonwealth to recover money owing by a State to it under the Financial Agreement, to pronounce a judgment that is unconditional, and can enact laws for the enforcement of that judgment against the State. Sec. 105A arms the Parliament with further powers. Sub-sec. 3 provides that the Parliament may make laws for the carrying out by the parties thereto of any such agreement. In this sentence, we

46 CLR 178

OF A. think the word "for" expresses the end or purpose, and the words

"carrying out by the parties are equivalent to performance or fulfilment by the parties. The considerations supplied by sub-sec. 5 again go far to determine the meaning and application of this provision. The clause, in our opinion, authorizes the enactment of laws calculated to bring about performance of their obligations by [No. 1].

the parties; laws to procure the fulfilment of the agreement. The words "the parties thereto" appear in sub-secs. 4 and 5 as well as in sub-sec. 3, and no doubt they are restrictive. They prevent the power from extending to the regulation of matters which might be considered conducive to effectuating the purposes of the agreement although not directly relating to actual performance by the parties. For instance, if the Commonwealth agreed with one State that money should be borrowed by them jointly at specified rates of interest, the Parliament could not under this power legislate to prevent competition on the money-market. But we cannot agree with the argument that the words "by the parties thereto" prevent the Parliament from adopting measures for satisfying liabilities created by the agreement in default of literal fulfilment by the parties

A law which provides the alternative to voluntary performance by the parties and compels involuntary satisfaction appears to us to be properly described as a law for the carrying out by the parties thereto of the agreement. Two other meanings were suggested of sub-sec. 3. It was said that its purpose was to enable the Federal Parliament to establish later agreements as valid and binding just as sub-sec. 2 authorized the Parliament to validate the Agreement made before the commencement of the alteration. Among the many answers to this contention the shortest is, perhaps, that the words "carrying out " cannot mean creating or establishing the agreement, but must mean acting under it. In the second place, it was suggested that the provision was intended to enable the Parliament to facilitate the carrying out of the agreement by empowering the parties to do things in performance of it which, in virtue of their Constitutions or otherwise, they were unable to do, or by making provision for matters which arose in the course of its performance. It is difficult to see what legal disabilities could exist to impede the parties in the performance of such an agreement.

46 CLR 179

Subsec. 5 makes the agreement binding notwithstanding anything contained in the Constitutions or laws of the States or the Common- wealth, and whatever the parties must do by law they clearly may do. Why the Parliament should need additional powers to provide for matters arising in the course of the agreement did not clearly appear; and we did not find it easy to apprehend the exact nature of the supposed problems which might arise in the course of perform- ing the agreement and admit of resolution by a power which on its terms could not add to or supplement the agreement, but could only provide for the carrying out thereof by the parties thereto. Moreover, it is evident from the terms of the Financial Agreement itself that, unless it is rescinded, no new agreement, as distinguished from a variation of the old Agreement, can be made for a very long time to come, because there can be little public debt of the States which is not comprised in the existing Agreement. Yet an examina- tion of the Financial Agreement failed, in our opinion, to disclose any important matter to which the power would apply if it received such a restricted construction. It appears to us that in the construe- tion of sub-sec. 3 the intention of sub-sec. 5 to make the obligations of the Financial Agreements paramount should be of great weight, and when this is considered in relation to the magnitude of the financial liabilities of the States taken over by the Commonwealth and the plain dependence of the Commonwealth upon the performance by the States of their obligations under the Agreement to enable it to meet those liabilities, the meaning and purpose of sub-sec. 3 are sufficiently clear. In our opinion it enables the Parliament to enforce performance by the States of their obligations under the Agreement, and it authorizes the main provision of the Financial Agreements Enforcement Act 1932, which is sec. 5. But we think that in the absence of sub-sec. 3, or, if a more limited construction of that sub-section were adopted, sec. 5 of the Financial Agreements Enforce- ment Act 1932 would, nevertheless, be valid. Sub-secs. 1 and 2 do no more than provide the preliminary conditions which must occur before the jurisdiction of the Court can be invoked by the particular procedure prescribed by sub-secs. 3 and 4. Sub-sec. 5 prescribes the number of Judges by which the jurisdiction may be exercised, and is supported as a valid law by sec. 79 of the Constitution.

46 CLR 180

Sub-sec. 6 is an exercise of the power conferred by sec. 51 (XXXIX.)

and, perhaps, of that conferred by sec. 78 (see The Commonwealth V New South Wales 1) When it enacts that the judgment shall operate as a charge upon all the revenues of the State, it might, if the obligation which the judgment enforced were subject to and qualified by a constitutional requirement of parliamentary appropriation, go [No. 1].

beyond what was incidental to the exercise of the judicial power. But inasmuch as sec. 105A (5), in our opinion, makes the obligation of the agreement absolute, it does no more than attach to the judgment a consequence which belongs to the enforcement of that obligation. Sub-sec. 7 then proceeds to enable the Houses of Parliament by resolution to bring into operation the provisions which effect an involuntary assignment of the State revenue. It is objected that the enforcement of the judgment is thus taken out of the hands of the Court. It is true that writs of execution issue out of the Court, but they issue as of course and more often than not they are directed to executive officers. The Court retains complete control of the judgment, and unless there be something in the conception of judicial power which confines all means of compelling obedience to the judgment to judicial action (and we do not think there is), there seems no reason why the Legislature should not make such provision as it thinks fit to ensure that the judgment is satisfied. Further, appears to us that secs. 7-13 (1) do no more than provide means for working out the charge created by sub-sec. 6 of sec. 5. When brought into force they operate directly to transfer the revenue and, properly considered, they are provisions attaching to the judgment a legal consequence, the operation of which is contingent, however, upon the resolution of both Houses. The objection made that, according to the title and recitals of the Act, it appears that the Legislature relied upon and intended to exercise only the power conferred by sec. 105A, appears to us to be unsound. In the first place, we do not think an intention to exclude other powers is disclosed by the Act, and, in the next place, we think the observations of Rich J. and of Starke J. in Ex parte Walsh and Johnson 2 respectively provide an answer to the contention.

1(1923) 32 C.L.R., at pp. 214-216, 2(1925) 37 C.L.R., at pp. 126-127, 46 CLR 181

The further objection that the real purpose of the Legislature was to enforce the agreement, and not the judgment as such, also seems to us to be misconceived. The motives of the Legislature are immaterial. What the statute actually does affords the real test of its validity, and sec. 5 provides for the ascertainment of a liability by the judicial power and attaches the consequences to the judgment.

A separate question arises as to the validity of sec. 6. No doubt, as no proclamation has been issued* under sec. 7 based upon sec. 6, this is a matter of less practical importance than it might have been. Sec. 6 cannot be supported, in our opinion, as an exercise of the power to legislate upon matters incidental to the execution of any power vested in the Federal Judicature. Its validity must rest upon sec. 105A (3), or upon secs. 61 and 105A in combination with sec. 51 (xxxix.). Upon the construction which we think sec. 105A (3) ought to receive, the question whether it authorizes sec. 6 depends upon what may be perhaps considered a refined distinction. If its application were contingent upon the existence in fact of an unsatisfied liability in the States to the Commonwealth, the construction which we have placed upon sub-sec. 3 of sec. 105A would clearly support the provisions of sec. 6. But it applies when the Auditor-General has certified that such a liability exists and the Houses of Parliament have adopted his certificate and passed a resolution in terms of sec. 6

46 CLR 182

notice, as reasonably necessary to ensure payment of a liability if

and when judicially established.

Minor criticisms may be made of various provisions of the Act. but none of them goes to the validity of the substantial and important parts of secs. 5 and 6 and secs. 7-13, and, having regard to sec. 15A of the Acts Interpretation Act 1901-1930, it is unnecessary to deal [No. 1].

with them. The writ in this action attacked the validity of the Financial Agreements (Commonwealth Liability) Act 1932, but very little attention was bestowed upon it during the argument. If it purports to impose any liability upon the States which is not imposed by the Financial Agreements, it is clear that that liability can only be imposed under sec. 4 (4), which requires a suit in this Court, and in that suit the State can raise the validity of the Act. In the view which we have taken of the Financial Agreements Enforcement Act 1932 the Commonwealth Liability Act plays no part. In these circumstances and having regard to the very inadequate treatment it received at the hands of the plaintiff in the discussion before us, we think we ought not to decide its validity. The only relief we can give would be a declaration of right, and this is in our discretion.

We think that the action should be dismissed.

STARKE J. This is an action on the part of the State of New South Wales against the Commonwealth and others claiming a declaration that the whole of the Financial Agreements (Commonwealth Liability) Act 1932 and the whole of the Financial Agreements Enforcement Act 1932 are ultra vires the Parliament of the Commonwealth, and are invalid, and ancillary relief. In December 1927 the Common- wealth and the States of Australia made an Agreement which is scheduled to the Financial Agreement Act No. 5 of 1928. By the Agreement the Commonwealth took over, on 1st July 1929, public debts of the States amounting to over six hundred million pounds, and assumed as between the Commonwealth and the States the liabilities of the States to the bondholders. It was also agreed that the Commonwealth should pay to bondholders, from time to time, interest payable on the public debts of the States taken over by the Commonwealth. The Commonwealth itself was, during a period of fifty-eight years, to provide certain amounts

46 CLR 183

46 C.L.R.]

OF AUSTRALIA. towards the interest payable in respect of the public debts of the States. On the other hand, each State agreed during the same period of fifty-eight years to pay to the Commonwealth the excess over the amounts which the Commonwealth agreed to provide necessary to make up as they fall due the interest charges falling due in that year on the public debt of the State taken over by the Commonwealth. The method by which these payments should be made was to be arranged from time to time between the Common- wealth and the States. A sinking fund was also established by the Agreement at the rate of 7s. 6d. for each £100 of the debts of the States. The Commonwealth agreed to contribute 2s. 6d. for each £100, and the States, each in respect of its debt, 5s. for each £100. Each State also agreed with the Commonwealth that it would, by the faithful performance of its obligation under the Agreement, indemnify the Commonwealth against all liabilities whatsoever, in respect of the public debt of that State taken over by the Common- wealth, other than the liabilities of the Commonwealth under the Agreement, to pay interest and make sinking fund contributions. This is but an outline of the provisions of the Agreement material to this case. Under this Agreement the Commonwealth took over public debts of the State of New South Wales amounting to more than two hundred million pounds.

An agreement of this kind adjusting the financial relation of the Commonwealth and the States required not only ratification by the Parliaments of the Commonwealth and the States but also an alteration of the Constitution of Australia. The Constitution was altered in the manner required by sec. 128 of that Act, and the altera- tion appears in the Act styled the Constitution Alteration (State Debts) 1928 (No. 1 of 1929). It provides (sec. 105A) :-(1) The Commonwealth may make agreements with the States with respect to the public debts of the States, including-(a) the taking over of such debts by the Commonwealth (b) the management of such debts; (c) the payment of interest and the provision and manage- ment of sinking funds in respect of such debts; (d) the consolidation, renewal, conversion, and redemption of such debts: (e) the indemni- fication of the Commonwealth by the States in respect of debts taken over by the Commonwealth; (f) the borrowing of money by

46 CLR 184

the States or by the Commonwealth, or by the Commonwealth for

the States. (2) The Parliament may make laws for validating any such agreement made before the commencement of this section. (3) The Parliament may make laws for the carrying out by the parties thereto of any such agreement. (4) Any such agreement may be varied or rescinded by the parties thereto. (5) Every such [No. 1].

agreement and any such variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State."

The Parliament of the Commonwealth approved of the Agreement already mentioned before the alteration of the Constitution (No. 5 of 1928), and validated it after the alteration of the Constitution was made (No. 4 of 1929). The Parliament of each State also ratified the Agreement: New South Wales (No. 14 of 1928), Victoria (No. 3554 of 1927), Queensland (18 Geo. v. No. 22), South Australia (No. 1837 of 1927), West Australia (No. 1 of 1928), Tasmania (No. 97 of 1927).

The object of all this legislation is apparent. It was to establish beyond question the validity of the Financial Agreement and all future agreements of the same kind, to render the rights and duties created or imposed thereby unalterable without the mutual agreement of all the parties thereto. The State of New South Wales did not provide certain interest payments upon its public debts in accordance with the Financial Agreement, and this led to the passing of the two Acts attacked in this action. It has been strenuously asserted that these Acts are an interference with the sovereign rights of the States and with the judicial power of the Commonwealth vested in its Courts. But, as has been pointed out more than once in this Court, the States are not sovereign powers. (See The Commonwealth V. New South Wales 1.) By the Constitution a restriction is placed upon their supposed sovereign rights by the grant to the Federal power of the right and power to legislate with respect to various matters. Again, one of the privileges or rights of a sovereign power is its immunity from action without its own consent. Yet by the

1(1923) 32 C.L.R., at pp. 208, 218. 46 CLR 185

Constitution this right or privilege was surrendered, and by sec. 75 jurisdiction is conferred on this Court in all matters in which the Commonwealth or a person suing or being sued on behalf of the Commonwealth is a party, between States, or between a State and a resident of another State (The Commonwealth v. New South Wales 1 ). Hence the rights and duties of the Commonwealth and the States, at least SO far as they can be referred to some legal standard, are justiciable and may be determined by judgment (The Commonwealth v. New South Wales South Australia v. Victoria 2 ). The exercise of the judicial power, however, " essentially involves the right to enforce the results of its exertion." So much is recognized both under our own Constitution and in the United States of America (Virginia v. West Virginia 3 ). The enforcement of judgments against States is not as a rule a question of any importance, for usually provision is "readily and promptly made to satisfy any such obligation. But if a State refuses or neglects to discharge such an obligation, the question assumes grave dimensions. A Court does not enforce its judgments. The Executive power of the Commonwealth, which is vested in the King under sec. 61 of the Constitution, necessarily acts in aid of the judicial power in this respect. In the case of Australian Railways Union V. Victorian Railways Commissioners 4 I ventured the opinion that nothing in the Constitution, before its alteration by sec. 105A, warranted the conclusion that the Commonwealth could, under its legislative, judicial, or executive functions, interfere with, or impair the constitutional power of the States to appropriate their consoli- dated revenue funds as by any Act of the State Legislature should be provided in that behalf. I see no reason for departing from this view, not because the obligations on the part of a Government to pay money under a judgment are contingent upon provision being made by Parliament for the discharge of such obligations, but because the provisions of sec. 51 do not explicitly SO provide, and no such authority is inherent in or incidental to the executive or judicial power. In the United States of America much greater authority is claimed both for the legislative power and the judicial power (Virginia Case). One, however, may well say with Chief Justice Marshall

1(1923) 32 C.L.R. 200. 2(1911) 12 C.L.R. 667. 3(1918) 246 U.S. 565. 4(1930) 44 C.L.R., at p. 389. 46 CLR 186

OF A. that the remedies suggested as incidental to the judicial powers in

the Virginia Case 1 savour too much of the exercise of the political power to be within the proper province of the judicial department (Cherokee Nation v. State of Georgia 2 ). The judicial remedies are still, I believe, undefined in the United States of America, for West Virginia submitted in the end to the judgments of the Supreme [No. 1].

Court of the United States. The argument on the part of the States that the judicial power of the Commonwealth can only be exerted by the Courts mentioned in sec. 71 of the Constitution is, of course, quite true. But though the rights and obligations of parties can only be authoritatively determined and adjudicated upon by the judicial power, it does not follow that the remedies for the non- observance of those rights and obligations must be sought through the judicial power and in judicial process. A party may have extra- judicial, as well as judicial, remedies. That depends in some cases upon the agreement of the parties and in others upon the provisions made by a competent legislative authority.

The interpretation of the new and extended powers given by sec. 105A of the Constitution must be now considered. The object for which the power is granted must be kept in view. Notwithstand- ing anything contained in the Constitution or the Constitutions of the States the Financial Agreement is binding on the Commonwealth and the States. It is part of the organic law of the Commonwealth. It can only be varied or rescinded by the parties thereto. Nothing in the Constitution or in the Constitutions of the States can affect it or prevent its operation. It creates rights and duties as between the Commonwealth and the States upon and in respect of which the judicial power of the Commonwealth can be exerted. The Parliament may make laws for the carrying out by the parties thereto of any such agreement." The words are not technical: to carry out an agreement is but to give effect to it, to perform and execute it, to bring it to a conclusion. Moreover, it is a legislative power operating with respect to agreements that are made obligatory by the Constitution upon both the Commonwealth and the States, Doubtless, the words authorize Parliament to make laws enabling and assisting the parties to perform their agreement. But in their

1(1918) 246 U.S. 565. 2(1831) 5 Peters 1. 46 CLR 187

context the words directly point to legislation for the performance and execution of the agreement; legislation that will bring about or tend to bring about, or "is really calculated to effect " that object (M'Culloch v. State of Maryland 1 ), or, in short, the enforcement by appropriate legislation of the agreement. The latter phrase is suggested by two or three amendments in the Constitution of the United States of America "Congress shall have power to enforce by appropriate legislation

this Article."

"Whatever legis- lation is

adapted to carry out the objects" of the amendments is held to be within the power of Congress (Ex parte Virginia 2 ). Much stress was laid upon the words "for the carrying out by the parties thereto of any such agreement." Certainly they limit the scope of the power and confine it to laws that will bring about, or tend to bring about, performance or execution of the agreement by the parties. But they do not limit the power to laws that simply enable or assist the parties to perform their own agreement. Further, it was said to be unlikely that a power of enforcement was given to the Commonwealth and none to the States. The parties did not contemplate default but if default took place the Commonwealth seems the natural custodian of the power to enforce the Agreement and to provide remedies for non-performance, whether on its own part or on the part of the States. It cannot affect the construction of the clause that the States cannot dictate to the Commonwealth what remedies it should grant in case it makes default in performance of the Agreement. The extent of the power being such as I have stated, the Parliament may exert it against the States because they are parties to the Agreement, and it may use all such means as are adapted to carry out the object of the power, the performance of the Agreement, whether those means be judicial or extra-judicial.

All that remains for consideration is whether the Acts attacked in this case fall within the description of a law for carrying out by the parties the Financial Agreement. Part II. of the Financial Agreements Enforcement Act deals with enforcement against State revenue. By the interpretation clause the State includes any public authority, incorporated or unincorporated, constituted under the

1(1819) 4 Wheat. 316, at p. 423. 2(1879) 100 U.S. 339, at pp. 345, 346. 46 CLR 188

A. laws of a State which has power to levy rates, taxes, or charges, or

collect revenue for a public purpose, and is declared by the Governor-General by proclamation to be a public authority for the purposes of this Act, but does not include a municipal council, shire council, or local governing authority. Again, specified revenue means such revenue or such class of revenue of a State specified or [No. 1].

described in a resolution passed by each House of Parliament in pursuance of this Act. The States are organized in the usual legislative, executive, and judicial departments, but the executive departments have, invariably, not only a central administration, but also various organizations and agencies constituted for the purposes of government. They are creatures of the State and exercise part of its functions. The interpretation clause adopts this well known constitutional development and declares that they shall be included within the term "The State." It does not extend the obligations of the States under the Financial Agreements to other bodies but simply includes the State and its organizations, agencies, and creatures within the provisions of the Enforcement Act. There is nothing, to my mind, unlawful in this provision. Following the interpretation clause comes Part II. of the Act, "Enforcement against State Revenue." By sec. 5 a summary method is provided of obtaining a binding and authoritative decision of the amount due and payable by a State under the Financial Agreement. The decision of the matter is remitted, as is necessary, to the judicial power and the jurisdiction is vested in this Court. That provision is clearly warranted by the provisions of sec. 76 of the Constitution. The requirement of a certificate from the Auditor-General of the amount due is made a condition of the exercise of this summary jurisdiction, and by sec. 22 is made prima facie evidence that the amount certified is due. The Constitution itself (sec. 76) warrants the former provision and decisions of this Court the latter (Williamson V. Ah On 1 ). A declaration of the amount due is enforceable as a judgment of the Court and in addition operates as a charge upon all the revenues of the State. The right and jurisdiction of the Court to pronounce such a judgment being established, the Parliament has clearly the right under sec. 105A to use appropriate means for

1(1926) 39 C.L.R. 95. 46 CLR 189

making that judgment effective against the State and its govern- mental agencies. A charge has long been known and treated as an appropriate remedy in aid of judgments (compare Judgments Act 1838, 1 &2 Vict. e. 110, sec. 13). A new and novel method of enforcing the declaration or judgment of the Court is also provided in sec. 5 (7) of the Act. It cannot be described as judicial process, but the Parliament is not confined to judicial process in the enforcement of judgments. It may, if it thinks fit, use extra- judicial means, and to it is assigned by sec. 105A of the Constitution a discretion " with respect to the means by which the powers " conferred by that section " are to be carried into execution." Upon the declaration of the Court that any amount is due by the State to the Commonwealth each House of Parliament may resolve that certain provisions of the Act shall apply in relation to the State specified in the resolution, and thereupon the revenue of the State specified in the resolution and included in a proclamation shall as from a date fixed by proclamation, and during the currency of the proclamation, be payable to the Treasurer of the Commonwealth or to persons authorized by him. The means chosen are relevant to, and adapted to the enforcement of the judgment against the State, and beyond this the matter is one for the discretion of Parliament. If the provision had been in the simple form adopted in New South Wales (Claims Against The Government and Crown Suits Act 1912, No. 27, sec. 11 (2)) In the event of such payment not being made within sixty days after demand, execution may be had for the amount, and levied upon any property vested in the Government -the relevance and propriety of the law as a means of enforcing the judgment would not, I suppose, have been denied, assuming, of course, that sec. 105A warrants laws enforcing the Financial Agreement. But it was the extra-judicial character of the provisions in sec. 5 (7) and sec. 7 that was, to some extent, relied upon for the purpose of invalidating them. The fallacy, with respect, resides in the view that Parliament cannot adopt extra-judicial methods as well as judicial process for the enforcement of the Financial Agreement and judgments establishing rights and duties thereunder. Some reliance was placed upon the authority to receive the State revenue " during the currency of the proclamation," but the only revenue

46 CLR 190

OF A. authorized to be collected under sec. 5 is the amount declared by

the High Court to be due and payable by the State.

I now come to the attack upon sec. 6 of the Act. In case of urgency and in order to protect the interests of the Commonwealth until the question of the liability of the State has been determined by the High Court, each House of Parliament may, if the Auditor- (No. 1].

General gives a certificate setting forth the amount of money due and payable by a State to the Commonwealth, approve and adopt the certificate and resolve that by reason of urgency it is desirable that certain provisions of the Act shall apply immediately in relation to the State specified in the resolution, and thereupon the revenue of the State specified in the resolution and included in a proclamation shall, as from a date fixed by proclamation and during the currency of the proclamation, be payable to the Treasurer, or persons authorized by him. This provision, unlike the provision of sec. 5, operates without previous legal process of any kind. But as soon as practicable after such a resolution, and in any event within two months, the Commonwealth must apply to this Court for a declaration that the amount stated in the resolution, or part thereof, is due and payable by the State, or the State may apply at any time after the resolution has been passed for a declaration that no amount. or

12. It follows that the Financial Agreements Enforcement Act is not authorized by sec. 105A (3) of the Constitution.

13. But this was the sole power sought to be exercised by Parlia- ment in passing the legislation in question. Even if it is permissible to bring other powers in aid, the legislation will be difficult to uphold as "properly framed laws in the exercise of legislative powers not considered or purposely rejected by those who framed the Financial Agreements Enforcement Act.

14. The Financial Agreements Enforcement Act is not a law authorized by sec. 51 (XXXIX.) as dealing with any matters which are really incidental to the exercise of any power vested in the Commonwealth Government by the Constitution. In determining this question sec. 61 of the Constitution is irrelevant, and the only relevant power of the Government which can be pointed to is sec. 105A (1) of the Constitution, which authorizes the Commonwealth Government only to " make financial agreements. The Common- wealth Government has no executive power to enforce any part of the Financial Agreements.

46 CLR 225

15. It has been authoritatively determined by this Court in The Commonwealth v. New South Wales 1 that sec. 78 does not authorize such legislation as the Financial Agreements Enforcement Act.

16. The decision of the Privy Council in the Sugar Case 2 shows the ambit of the power contained in sec. 51 (xxxix.). The suggestion that the Financial Agreements Enforcement Act may be regarded as a law dealing with matters incidental to the execution by the High Court of its original jurisdiction to determine all "matters" " between Commonwealth and States, cannot be supported.

17. The decision of this Court in The Commonwealth v. New South Wales (1) shows that the exercise of the High Court's juris- diction in matters between Commonwealth and States under sec. 75 (III.) of the Constitution, is based upon the principle of reciprocal liability of Commonwealth and States, i.e., "equal and undis- criminating responsibility to obey the law or make reparation" (per Isaacs C.J., Rich and Starke JJ. 3 ).

18. It is assumed in favour of the Commonwealth that, with respect to a selected class of contracts (e.g., the Financial Agreements), the Commonwealth Parliament may pass laws giving judgment creditors remedies by way of execution, and it is again assumed that execution by way of seizure of State or Commonwealth revenues is a remedy not inconsistent with the Federal nature of the Constitution.

19. But a law which, with respect to the enforcement of the Financial Agreements by the High Court, gives a judgment creditor remedies only in the event of that judgment creditor being the Commonwealth, and denies any remedy to the States, so far from dealing with incidents in the exercise of the High Court's jurisdiction, provides for something quite foreign to and inconsistent with the impartial administration of justice as between Commonwealth and State.

20. The Financial Agreements Enforcement Act offends against the principle of "equal and undiscriminating responsibility to obey the law or make reparation" which is contained in sec. 75 (III.) of the Constitution, as much by narrowing and restricting the

1(1923) 32 C.L.R. 200. 2(1914) A.C. 237 17 C.L.R. 644. 3(1923) 32 C.L.R., at p. 214. 46 CLR 226

constitutional meaning of "matters," as determined by the High Court, for the purpose of executing a judgment in respect of such " matters," as if it provided with respect to all or any matters that judgment creditors' remedies should be available to the Commonwealth and never to the States.

21. The Financial Agreements Enforcement Act is inconsistent [No. 1].

with sec. 105A (5) of the Constitution, because it is implied from that sub-section that the Financial Agreements bind the Common- wealth as well as the States, and bind equally in respect of each and every part of the Agreement. To provide drastic remedies, to be applied only in the event of some of the parties breaking the Financial Agreements, is to effect a substantial alteration in the contractual relationship between the seven parties. The effect of the law is to add special penalty clauses to the Financial Agreements available against the States only, and this is inconsistent with sec. 105A (5) of the Constitution.

22. In the Financial Agreements Enforcement Act the High Court's jurisdiction is interposed, not for the purpose of procuring the enforcement of the Financial Agreements, but as a means to another end-namely, the giving of a special advantage to the Commonwealth and the imposition of very special disadvantages upon the States in relation to their performance of duties and their exercise of rights under the Financial Agreements.

23. Not only therefore is sec. 6, providing for execution against State revenues before any judgment, invalid, but sec. 5 is not authorized by any legislative power of the Commonwealth. No part of either section can be saved under sec. 15A of the Acts Interpretation Act 1901-1930. The whole of Part II. of the Act depends upon the validity of these two sections and Part II. is, therefore, ultra vires and void.

Both secs. 5 and 6 of the Financial Agreements Enforcement Act are ultra vires and void, and a declaration should be made that the whole of Part II. of the Act which is dependent upon the validity of secs. 5 and 6 is invalid. It is not necessary to express any conclusion as to the validity of the Financial Agreements (Commonwealth Liability) Act, No. 2 of 1932, although enough has

46 CLR 227

been said to show that part of it seems to be based upon a miscon- struction of Part III. of the first Financial Agreement.

McTIERNAN J. The Financial Agreements Enforcement Act 1932, the validity of which is disputed in this action, contains (inter alia) drastic provisions, novel in the law of the Commonwealth, to divert into the hands of the Treasurer of the Commonwealth the revenue of a State flowing into the hands of its officers, who are authorized by the laws of the State to collect it. These provisions are enacted for carrying into effect a judgment which may be obtained by the Commonwealth in proceedings instituted pursuant to the Act against a State for the recovery of moneys certified by the Auditor- General of the Commonwealth to be due and payable and unpaid by the State under and by virtue of the Financial Agreements mentioned in the Act (sec. 5 and secs. 7-13). The statute also makes provision for impounding the revenue of the State prior to the commencement of proceedings SO that, if the Commonwealth obtains judgment, the revenue can be applied in satisfaction of the judgment (sec. 6).

It was contended for the States which were represented at the hearing that it is ultra vires the Parliament of the Commonwealth to make a law to charge or collect the revenues of a State as a means for enforcing a judgment obtained against it, for the reason that no appropriation of the revenues of a State possessing the system of responsible government can be lawfully made without the approval of its Parliament. An allied contention was that it is an implied condition of the Financial Agreement that a State's obligation under it to pay moneys to the Commonwealth is conditional upon the Parliament of the State voting money to satisfy the obligation, and it is, therefore, ultra vires the Parliament of the Commonwealth to make laws for the enforcement of such an obligation on the footing that it is absolute and free of any such condition. In support of these contentions reliance was placed upon views expressed in this Court in Australian Railways Union V. Victorian Railways Commissioners 1 and the line of cases cited by Starke J. at p. 389. It will be observed that the obligation

1(1930) 44 C.L.R., at pp. 352, 389-390, 391-392. 46 CLR 228

imposed upon the natural or juristic person representing the State which was in question in that case, arose out of an award of the Commonwealth Court of Conciliation and Arbitration, which was created by Parliament in exercise of the powers contained in sec. 51 (xxxv.) and sec. 51 (XXXIX.) of the Constitution of the Common wealth. But the nature of the obligation which arises out of a (No. 1].

Financial Agreement made or validated pursuant to sec. 105A of the Constitution of the Commonwealth is affected by sec. 105A (5), which is in these terms "Every such agreement and any such variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State." The Financial Agreements Enforcement Act, which is challenged in this action, applies to agreements upon which sec. 105A operates. The imperious character of the language employed in this sub-section of the Constitution, in my opinion, renders certain the paramount force of any Financial Agreement to which the sub-section applies. It restrains the Commonwealth and every State, which is a party to such an Agreement, from contravening the Agreement and raises the obligations, which the Agreement fastens on the parties, to the level of an obligation arising out of the Constitution itself. Those provisions in the Constitution of a State or in any law of the Parliament of a State, which require that Parliament must appropriate revenue before it can be lawfully applied in satisfaction of the obligation of the State under any agreement or judgment, are clearly included among the "things" which are overridden by sec. 105A (5). The proposition that the payment of moneys due under a relevant Financial Agreement, or the satisfaction of a judgment for moneys found to be due thereunder, must in law depend upon the discretion of the Parliament of a State which IS a party to the Agreement, is, in my opinion, repugnant to sec. 105A (5) of the Constitution. The Commonwealth is a Government, not a mere confederation of States, and no State within the Common- wealth is entitled to decline to fulfil according to its legal intent any obligation imposed upon it by the Constitution. Sec. 105A (5) is not a dead letter it pulsates with the vitality of the Constitution

46 CLR 229

itself and imbues with the force of a fundamental law any agree- ment to which it applies. In this view the contention cannot be supported that the Financial Agreements Enforcement Act is invalid because it attempts to enforce a judgment whether the State Parliament has or has not appropriated revenue. The judgment is a determination given under the judicial power of the Commonwealth that the State is under an obligation, regardless of anything contained in the Constitution or any law of the State to perform its undertaking to pay moneys to the Commonwealth. The duty to obey such an adjudication may be enforced by appropriate laws of the Commonwealth.

The question now arises as to what part of the Constitution of the Commonwealth empowers the Commonwealth to enact secs. 5 and 6. In my opinion sec. 5 is valid under secs. 105A (3) and 105A (5), sec. 75 (iii) and sec. 51 (xxxix.), and sec. 6 is valid under secs. 105A (3) and 105A (5). There can be no doubt as to the liability of a State to be sued by the Commonwealth in the High Court for moneys due and payable under the Financial Agreement which was validated by the Financial Agreement Volidation Act 1929. It was decided in The Commonwealth v. New South Wales 1 that the expression "sovereign State" as applied to a State of Australia is not justified. Isaacs, Rich and Starke JJ., in the course of their joint judgment, said 2 :- The conclusion to which we were invited to come in interpreting the Constitution upon the assumption that New South Wales is a sovereign State' would be both mischievous and unfounded. The term

sovereign State as applied to constituent States is not strictly correct even in America since the severance from Great Britain.

Still further from the truth is it in Australia. The appellation sovereign State' as applied to the construction of the Commonwealth Constitution is entirely out of place, and worse than unmeaning." It was also decided in that case that the High Court had jurisdiction to entertain an action for tort brought by the Commonwealth against the State without the consent of the State. The jurisdiction of the High Court under sec. 75 was referred to by Knox C.J. in the above-mentioned case, at p. 204, in these

1(1923) 32 C.L.R. 200. 2(1923) 32 C.L.R., at p 210. 46 CLR 230

OF A. terms: "The unanimous decision of the Court" in South Australia V.

Victoria 1 " was

that the word 'matters' in sec. 75 meant matters which were of a like nature to those which would arise between individuals and which were capable of determination upon principles of law." In the course of their judgment Isaacs, Rich and Starke JJ. also said 2 :- The people of New South Wales are not, [No. 1].

as are, for instance, the people of France, a distinct and separate people from the people of Australia. The Commonwealth includes the people of New South Wales as they are united with their fellow- Australians as one people for the higher purposes of common citizenship, as created by the Constitution. When the Common wealth is present in Court as a party, the people of New South Wales cannot be absent. It is only where the limits of the wider citizenship end that the separateness of the people of a State as a political organism can exist. To appeal to the analogy of an entirely foreign independent State is to appeal to an impossible standard. And again this Court is not a foreign Court. It is the tribunal specially created by the united will of the Australian people, as a Federal Court and as a national Court. It has verv special functions in relation to the powers, rights and obligations springing from the Constitution and the laws made under matters which concern the Commonwealth as the organization of the whole population of this Continent, the States in their relations to the Commonwealth and to each other, and the people in their relation to the Commonwealth and to the States regarded as constituent parts of the Commonwealth." Sec. 105A (3) of the Constitution is in these terms: "The Parliament may make laws for the carrying out by the parties thereto of any such agreement." The true content of the power conferred by sec. 105A (3) was much debated at the hearing. I think that it extends to the enactment of laws which invoke the judicial power and aid it when it is exercised for the carrying out by the parties, or any one or more of them, of any relevant Financial Agreement. It may be that it is not every law which Parliament thinks expedient for coercing the parties into carrying out the Agreement that falls within the power conferred by sub-sec. 3. But the power at least extends to the enactment

1(1911) 12 C.L.R. 667. 2(1923) 32 C.L.R., at p. 209. 46 CLR 231

of such a law which is an aid to the execution of the judgment of the Court pronounced in legal proceedings arising out of the Agreement. This view of the scope of sub-sec. 3 is, in my opinion, confirmed by the fact that the contracting parties are all subject to the jurisdiction of the Court, that the Financial Agreement is not a mere political engagement but a contract of strict legal obligation, and that a breach of the Agreement gives rise to a justiciable matter. That part of sec. 5 which prescribes a speedy method by which the Commonwealth may apply to the High Court for a declaration that an amount of money stated in a certificate of the Auditor-General to be due and payable and unpaid by the State to the Commonwealth is due, is clearly valid as an exercise of the power of the Parliament to make laws incidental to the execution of the judicial power (sec. 51 (XXXIX.) ). Sub-sec. 6 of sec. 5, which provides in effect that the declaration made upon such an application by the Commonwealth shall be enforceable as a judgment and shall operate as a charge upon all the revenues of the State, is plainly a law for enforcing the judgment, and is clearly made with respect to a matter which is incidental to the execution of the judicial power. Sec. 7 provides a method of enforcing the judgment. By sec. 5 (6) it is stated that the method contained in sec. 7 is in addition to those already provided by law. In my opinion sec. 7 is also valid as a law with respect to a matter incidental to the exercise of the judicial power. The remainder of Part II. is also valid on that ground. In Griffin v. South Australia

46 CLR 232

of a judicial power" " (Virginia v. West Virginia 1 ). Marshall C.J. said in Wayman v. Southard 2 'The judicial department is invested with jurisdiction in certain specified cases, in all of which it has power to render judgment. That a power to make laws for carrying into execution all the judgments which the judicial department has power to pronounce, is expressly conferred by this [No. 1].

clause" (Art. 1, sec. 8, cl. 18), "seems to be one of those plain pro- positions which reasoning cannot render plainer. therefore, will only say, that no doubt whatever is entertained on the power of Congress over the subject." This passage is quoted by Wil- loughby on the Constitution of the United States, 2nd ed., vol. II., p. 1297. Reference may also be made to Bank of the United States v. Halstead 3 Board of Commissioners of Knox County v. Aspinwall 4 Riggs v. Johnson County 5. It is a well-established rule that the Executive may lawfully act in the enforcement of a judgment, and a law which empowers the Executive to do SO is a valid exercise of the legislative power of the Commonwealth. The effect of secs. 7 and 8 appears to be that the Treasurer or his authorized officer is appointed to collect the revenue of the judgment debtor for the judgment creditor until its judgment is satisfied. When the Parliament has resolved that the provisions of the Act should come into operation, and the Governor-General has issued the prescribed proclamation, the debtors of the State, described in the Act, become the debtors of the Commonwealth, which may recover the debts by the same judicial remedies as were available to the State. The provisions of the Act are, indeed, self-executory, and apart from the provision which enables the Treasurer to receive the money to be paid in satisfaction of the judgment, neither require nor authorize the use of power by the executive officers of the Commonwealth. Nevertheless, by way of precaution, sec. 20 provides that "Nothing contained in this Act shall impair or diminish the control of the High Court over the execution or enforcement of any judgment of the Court." It is clear that the officers of the Commonwealth who may act in the execution of the judgment would not be persons

1(1918) 246 U.S, at p. 603. 2(1825) 10 Wheat., at p. 22. 3(1825) 10 Wheat. 51. 4(1860) 65 U.S. 376, at p. 384, 5(1867) 73 U.S. 166, at p. 187. 46 CLR 233

with independent executive authority, as the section reserves to the Court the control over the execution of the judgment. If the present statute had provided that the judgment recovered under sec. 5 could be enforced by writs issued out of the Court and served upon the debtors of the State, in order to secure payment to the Commonwealth of moneys due and payable by them to the State,

I do not think that any attack could have been made upon the validity of such provisions. The method which Parliament has adopted to secure that result is, in my opinion, equally valid as a law for carrying the judgment into effect.

Sec. 6 remains for consideration. It cannot be supported by reference to the judicial power, unaided by sec. 105A (3). I think it is valid under this sub-section. The effect of sec. 6 is, in my opinion, preservative. It interrupts the flow of revenue, thereby preventing its disbursement before the judicial power can operate. Disbursement of revenue by a State may result in the Agreement not being carried out by the parties. Interpreting sec. 105A (3) as a grant of power to make laws which invoke the judicial power and aid it when it is exercised for the carrying out of the Agreement by the parties or any one or more of them, I think that the limits of sec. 105A (3) are not exceeded by a law which preserves the thing that must be paid under the Agreement, that is to say, the revenues of a State, until the judicial power operates. If the Court finds that moneys are due under the Agreement, it is carried out by the transfer of those revenues to the Commonwealth under the authority of a judgment. The revenues of the State are safeguarded by sec. 6 (4), which provides: " At any time after such a resolution has been passed by both Houses of the Parliament, the Attorney- General of the State may apply to the High Court for a declaration that no part of the amount stated in the resolution or a smaller amount than that stated in the resolution is due and payable and unpaid by the State to the Commonwealth." Sec. 75 (III) of the Constitution vests original jurisdiction in the High Court in all matters in which the Commonwealth or a person suing or being sued on behalf of the Commonwealth is a party. This section, as has already been mentioned, enables the Commonwealth to sue

46 CLR 234

a State without its own consent (The Commonwealth v. New South

Wales 1 ). An objection was made to secs. 5 and 7 of the Financial Agreements Enforcement Act and the subsequent sections for carrying a judgment into effect, that they were bad as an exercise of a power to make a law on a matter incidental to the execution of the authority vested in the Federal Judicature by sec. 75 (III.), [No. 1].

because the law does not grant the benefit of the special procedure and methods of enforcing a judgment to the States, parties to a Financial Agreement, and is limited to the enforcement in part of each one of three contracts. The first objection may go to the fairness of the law, but on that aspect of the Act it is not my duty to express any opinion. Moreover, a view as to its fairness is not the final test of the legal validity of such a law. These provisions do not assume to extinguish any liabilities to which the Common- wealth is subject under the Financial Agreements, nor do they deny any State the right to sue the Commonwealth and proceed to judgment and execution according to law if it has a claim founded on all or any one of the Agreements. The remedy given to the Commonwealth may appear to be more drastic and efficacious than those available to any State, but that circumstance is not, in my opinion, fatal to the validity of secs. 5 and 7 or any other sections against which this criticism was made. The second objection, I think, also fails. It is not necessary that the law in question should relate to all the matters or a complete class of matters, e.g., contracts, which are within the scope of sec. 75.

The argument mainly centred upon secs. 5 and 6 and Part II. generally. There was only a very brief discussion of other sections, and of the validity of the Financial Agreements (Commonwealth Liability) Act, which was also questioned. The validity of the sections, which I have upheld, does not in any way depend upon that Act. In view of my opinion that Part II., which is headed 'Enforcement against State Revenue," of the Financial Agreements Enforcement Act is valid, I think that the declaration claimed should not be made.

Action dismissed.

1(1923) 32 C.L.R. 200. 46 CLR 235

Solicitor for the State of New South Wales, J. E. Clark, Crown Solicitor for the State of New South Wales.

Solicitor for the Commonwealth, W. H. Sharwood, Crown Solicitor for the Commonwealth.

Solicitor for the State of Victoria, F. G. Menzies, Crown Solicitor for the State of Victoria.

Solicitor for the State of Tasmania, A. Banks-Smith, Crown Solicitor for the State of Tasmania.

[HIGH COURT OF AUSTRALIA.)

THE STATE OF NEW SOUTH WALES.

THE COMMONWEALTH AND OTHERS

RESPONDENTS. DEFENDANTS, Appeal-Appeal to Privy Council-Limits inter se of constitutional powers of H. C.

Commonwealth and States-Application to High Court for certificate-Special regone-Appropriation by Commonwealth of State revenues-Division of opinion of Court-The Constitution (63 &64 Vict. c. 12), secs. 74, 105s-Constitution Alteration (State Debts) 1928 (No. 1 of 1929), sec. 2-Financial Agreement April 18, 22. Act 1928 (No. 5 of 1928) - Financial Agreement Validation Act 1929 (No. 4 of 1929)-Financial Agreements Enforcement Act 1932 (No. 3 of 1932) Financial Agreements (Commonwealth Liability) Act 1932 (No. 2 of 1932).

On an application to the High Court for a certificate under sec. 74 of the Constitution that questions of law as to the limits inter se of the constitutional powers of the Commonwealth and of the State of New South Wales involved in the case of New South Wales v. The Commonwealth [No. 1], ante, 155, were questions which ought to be determined by His Majesty in Council,

Held, by Gavan Duffy C.J., Rich, Starke, Dixon and McTiernan JJ. (Evatt J. dissenting), that the application should be refused.