R v Clarence

The High Court of Australia considered an action brought by the State of Victoria and its Attorney-General, and the State of South Australia and its Attorney-General, against the Commonwealth. The plaintiffs sought declarations that the Federal Aid Roads Act 1926 was invalid and ultra vires the Commonwealth Parliament, that any agreements made under the Act were void, and that moneys appropriated by the Act constituted surplus revenue. They also sought an injunction to restrain the Commonwealth from paying moneys to any State under the Act or related agreements.

The central legal issue before the Court was whether the Federal Aid Roads Act 1926 was a valid exercise of the Commonwealth Parliament's legislative power, specifically under section 96 of the Constitution, which permits the Commonwealth to grant financial assistance to any State on such terms and conditions as Parliament thinks fit. The plaintiffs argued that the Act was not a law for granting financial aid but rather a law relating to road-making, and that the conditions imposed by the Act were beyond the scope of section 96, potentially infringing other constitutional provisions.

The Court, by a majority, held that the Federal Aid Roads Act 1926 was a valid enactment. It found that the Act was plainly warranted by section 96 of the Constitution, which grants the Commonwealth Parliament broad power to provide financial assistance to the States on terms and conditions determined by Parliament. The Court determined that the Act was not affected by section 99 of the Constitution, which prohibits preferences between States, nor by any other constitutional provisions. Consequently, the action was dismissed.