The State of New South Wales v The Commonwealth

The case of *The State of New South Wales v The Commonwealth* was heard in the High Court of Australia. The dispute arose when the State of New South Wales sought to recover £160,000 from the Commonwealth, claiming this amount represented surplus revenue due to the State for June 1908. The Commonwealth had deducted this sum, arguing it was a legitimate expenditure.

The central legal issue before the Court was the interpretation of "surplus revenue" as used in section 94 of the Constitution and its relationship with "expenditure" as contemplated by section 89. Specifically, the Court had to determine whether money appropriated by Parliament for specific purposes, but not yet disbursed, constituted "expenditure" for the purposes of calculating the surplus revenue payable to the States. The State of New South Wales contended that expenditure meant actual disbursements, while the Commonwealth argued that appropriated funds, even if not yet paid out, should be treated as expenditure.

The High Court, in its reasoning, held that the term "surplus revenue" in section 94 of the Constitution referred to the same aggregate amount as the balances required to be paid monthly to the States under section 89. The Court clarified that section 89 did not mandate exact monthly balances but rather approximate amounts based on the year's anticipated financial operations. Crucially, the Court determined that money appropriated by the Commonwealth Parliament for a specific purpose, even if not yet disbursed, was considered "expenditure" within the meaning of section 89. Such appropriated funds would only become part of the distributable surplus revenue under section 94 once their disbursement was no longer lawful or necessary.

Consequently, the Court found that the sums appropriated by the *Coast Defence Appropriation Act 1908* and the *Old-age Pensions Appropriation Act 1908* were correctly deducted from the revenue for the financial year in question when calculating the surplus revenue payable to the States under section 94 of the Constitution and section 4 of the *Surplus Revenue Act 1908*. Therefore, the deduction of £160,000 from the balance payable to New South Wales was lawful, and judgment was entered for the defendant, the Commonwealth.