Victorian WorkCover Authority v Andrews [2005] FCA 94 (17 February 2005)

Last Updated: 17 February 2005

FEDERAL COURT OF AUSTRALIA

Victorian WorkCover Authority v Andrews [2005] FCA 94

WORKERS COMPENSATION – Safety, Rehabilitation and Compensation Act 1988 (Cth) – ss 100, 104, 108, 108A – scheme whereby corporations covered by compulsory State workers compensation may be covered by Commonwealth scheme and exempt from State scheme – administrative law – whether State insurer has right to be heard before decisions are made under Commonwealth scheme – Commonwealth Constitution – s 51(xiv) – whether Commonwealth law invalid as a law "touching or concerning" State insurance.


Commonwealth Constitution

Safety, Rehabilitation and Compensation Act, 1988 (Cth)
Accident Compensation Act, 1985 (Vic)
Accident Compensation (WorkCover Insurance) Act, 1993 (Vic)
Workplace Relations Act 1966 (Cth)
Croome v Tasmania [1997] HCA 5; (1997) 191 CLR 119
Acts Interpretation Act 1901 (Cth)
Treasury Notes Act, 1893 (Qld)
Bank Issue Act, 1893 (NSW)
Post Office Statute, 1866 (Vic)
Savings Bank Act, 1875 (SA)
Savings Banks Act (1890)
Savings Banks Amendment Act of 1896
Agricultural Bank Act, 1894 (WA)
State Advances Act, 1895 (SA)
Agricultural Bank Act 1901 (Qld)
State Advances Act 1907 (Tas)

Australian Competition and Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174
Broadmoor Hospital Authority v R [2000] 2 All ER 727
Plaintiff S157/2002 v Commonwealth [2003] HCA 2; (2003) 211 CLR 476
State of South Australia v Slipper (2003) 203 ALR 473
Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259
Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1
McWilliam v Civil Aviation Authority [2004] FCA 1701
State of South Australia v Slipper [2004] FCAFC 164
FAI v Winneke [1982] HCA 26; (1982) 151 CLR 342
Minister for Immigration & Ethnic Affairs v Teoh [1995] HCA 20; (1995) 183 CLR 273
Bread Manufacturers of NSW v Evans [1981] HCA 69; (1981) 180 CLR 404
R v MacKellar Ex parte Ratu [1977] HCA 35; (1977) 137 CLR 461
Kioa v West [1985] HCA 81; (1985) 159 CLR 550
RG Capital Radio Ltd v Australia Broadcasting Authority [2001] FCA 855; (2001) 185 ALR 573
Western Australia v Wilsmore [1982] HCA 19; (1982) 149 CLR 79
Melbourne Corporation v The Commonwealth [1947] HCA 26; (1947) 74 CLR 31
Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276
Re Wakim Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511
Commissioners of the State Savings Bank of Victoria v Permewan Wright & Co Ltd [1914] HCA 83; (1914) 19 CLR 457
Bank Officials’ Assoc (SA Branch) v Savings Bank of South Australia [1923] HCA 25; (1923) 32 CLR 276
Rural Bank of NSW v Hayes [1951] HCA 58; (1951) 84 CLR 140
Glenorchy v Agricultural Bank (1936) 31 Tas LR 75
Aust Health Insurance Assoc v Esso (1993) 41 FCR 450
State Bank of NSW v Commonwealth Bank [1986] HCA 62; (1986) 161 CLR 639
SGH Ltd v FCT [2002] HCA 18; (2002) 210 CLR 51
Bank of NSW v Cth [1948] HCA 7; (1948) 76 CLR 1
Amalgamated Society of Engineers v Adelaide Steamship Co Ltd [1920] HCA 54; (1920) 28 CLR 129
Re Residential Tenancies Tribunal of NSW; Ex parte Defence Housing Authority [1997] HCA 36; (1997) 190 CLR 410
NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48; (2004) 79 ALJR 1

Record of the Convention Debates – Sydney Session, 1897
Collier Banking in Australia (1934)
Victorian Royal Commission on State Banking Victorian Parliamentary Papers, 1895 Vol 4
Opinions of the Attorneys-General of the Commonwealth of Australia, Vol 1 1901-1914 (1981)
Quick & Garran The Annotated Constitution of the Australian Commonwealth (1901)
Record of the Convention Debates – Sydney, 1891
Record of the Convention Debates – Adelaide Session, 1897
Mascarenhas Public Enterprise in New Zealand (1982)
Productivity Commission Inquiry Report National Workers’ Compensation and Occupational Health and Safety Frameworks (2004)



VICTORIAN WORKCOVER AUTHORITY v KEVIN JAMES ANDREWS, MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS and BARRY LEAHY & Ors and OPTUS ADMINISTRATION PTY LTD and ATTORNEY-GENERAL FOR THE STATE OF VICTORIA

VID 1332 of 2004







SELWAY J
17 FEBRUARY 2005
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1332 OF 2004

BETWEEN:	VICTORIAN WORKCOVER AUTHORITY APPLICANT
AND:	KEVIN JAMES ANDREWS, MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS FIRST RESPONDENT BARRY LEAHY & Ors SECOND RESPONDENT OPTUS ADMINISTRATION PTY LTD THIRD RESPONDENT ATTORNEY-GENERAL FOR THE STATE OF VICTORIA INTERVENER
JUDGE:	SELWAY J
DATE OF ORDER:	17 FEBRUARY 2005
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The application be dismissed.

2. The applicant to pay the costs of the respondents.

3. No order of costs in relation to the Attorney-General for the State of Victoria.






Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1332 OF 2004

BETWEEN:	VICTORIAN WORKCOVER AUTHORITY APPLICANT
AND:	KEVIN JAMES ANDREWS, MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS FIRST RESPONDENT BARRY LEAHY & Ors SECOND RESPONDENT OPTUS ADMINISTRATION PTY LTD THIRD RESPONDENT ATTORNEY-GENERAL FOR THE STATE OF VICTORIA INTERVENER

JUDGE:	SELWAY J
DATE:	17 FEBRUARY 2005
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 In these proceedings the applicant seeks various declarations and certiorari and other relief arising from its claim that determinations made by the first respondent ("the Minister") under s 100 of the Safety, Rehabilitation and Compensation Act, 1988 (Cth) ("the SRC Act") on 7 July 2004 and on 30 August, 2004 are invalid. On 7 July, 2004 the Minister declared that the third respondent (Optus) was eligible to be granted a licence under Part VIII of the SRC Act. On 30 August, 2004 the Minister declared that Toll Transport Pty Ltd, Toll North Pty Ltd and Toll IPEC Pty Ltd ("the Toll Companies") were eligible to be granted a licence.

2 The applicant also seeks declarations, certiorari and other relief arising from its claim that ss 104(1), 108(1) and 108A(7)(a) of the SRC Act, taken together, are invalid with the consequence that a licence granted by the second respondent ("the Commission") to Optus on 1 November, 2004 is invalid.

3 For the reasons given below, I do not think that the applicant has made out either that the declaration is invalid or that the relevant provisions of the SRC Act are invalid. The application must be dismissed.

4 This case concerns the powers of the Minister pursuant to s 100 of the SRC Act and the powers of the Commission under s 104 of the SRC Act. Part VIII of the SRC Act authorises the Commission to grant a licence to an "eligible" corporation. Such a body is then an "employer" for the purposes of the SRC Act and liable to pay compensation under the SRC Act. Where the relevant body is not a "Commonwealth authority" there is a two stage process to become licensed. The first step involves a declaration by the Minister under s 100 of the SRC Act:

‘If the Minister is satisfied that it would be desirable for this Act to apply to employees of a corporation that:

(a) is, but is about to cease to be, a Commonwealth authority; or

(b) was previously a Commonwealth authority; or

(c) is carrying on business in competition with a Commonwealth authority or with another corporation that was previously a Commonwealth authority;

the Minister may, by notice in writing, declare the corporation to be eligible to be granted a licence under this Part.’

5 The second step involves the grant of a licence by the Commission. The Commission’s power to grant a licence is in s 103 of the SRC Act:

‘(1) The Commission may, on application made in accordance with section 102, grant the eligible applicant a licence for a specified period.

(2) If the Commission grants a licence to an eligible applicant, the Commission must determine:

(a) in accordance with Division 3--the scope of the licence so far as concerns the degree to which, and the circumstances in which, the licensee may accept liability for compensation; and

(b) in accordance with Division 4--the scope of the licence so far as concerns the degree to which, and the circumstances in which, the licensee is authorised to manage claims; and

(c) in accordance with Division 5--the conditions (if any) to which the grant of the licence is subject.’

6 In making that decision to grant a licence the Commission is required to proceed in accordance with s 104 of the SRC Act:

‘(1) If the Commission considers, having regard to:

(a) the information contained in an application received by it; and

(b) any further information that is provided to the Commission by the applicant for the purpose of enabling consideration of the application; and

(c) any other matter that the Commission considers relevant;

that it is appropriate to do so, the Commission may grant the licence sought. On granting the licence, the Commission must, by written notice given to the applicant, inform the applicant of its decision.

(2) In order for the Commission to be satisfied, for the purposes of subsection (1), that it is appropriate to grant an applicant the licence sought, the Commission must be satisfied that:

(a) the applicant has sufficient resources to fulfil the responsibilities imposed on it under the licence; and

(b) the applicant has the capacity to ensure (where the scope of the licence so provides) that claims that are to be managed either by the licensee, or by another person identified in the licence on the licensee's behalf, will be managed in accordance with standards set by the Commission for the management of claims; and

(c) the grant of the licence will not be contrary to the interests of the employees of the licensee whose affairs fall within the scope of the licence; and

(d) the applicant has the capacity to meet the standards set by the Commission for the rehabilitation and occupational health and safety of its employees.

(3) If the Commission does not consider it appropriate to grant the applicant the licence sought, it must, by written notice given to the applicant, inform the applicant that it has decided to refuse the application and provide reasons for its decision.

(4) Nothing in subsection (3) prevents the Commission, with the written agreement of the applicant, granting the applicant a licence having a different scope to the licence sought by the applicant.’

7 The licence granted under s 103 of the SRC Act has the effect that the licensee is not subject to the laws of a State or Territory "relating to workers compensation": s 108A(7)(a) of the SRC Act.

8 The applicant argues that this effect means that the legislation "touches and concerns" State insurance and is consequently invalid. This is discussed in more detail below. Otherwise, it is accepted that the relevant provisions are within the legislative competence of the Commonwealth Parliament. Most obviously the legislation might be supported under the "insurance" power in s 51(xiv) of the Commonwealth Constitution. Given the terms of s 100 of the SRC Act, the legislation might also be supported by whatever head of power authorised the Commonwealth to establish the relevant "Commonwealth authority" in the first place. Where the relevant "corporation that was previously a Commonwealth authority" (see s 100(c) SRC Act) is Telstra Corporation Ltd (Telstra), for example, the power in s 51(v) of the Commonwealth Constitution might be called in aid, at least so long as the activities of that corporation can be characterised as falling within that power. It might also be supported under the "corporations" power in s 51(xx) of the Commonwealth Constitution. There may well be other legislative powers that could be relied upon.

9 There is no real factual dispute between the parties. The factual context in which the dispute arises can be summarised as follows:

(a) Optus and the Toll Companies both employ staff in Victoria. Optus currently has compulsory WorkCover insurance pursuant to the Accident Compensation Act, 1985 (Vic) (the AC Act) and the Accident Compensation (WorkCover Insurance) Act, 1993 (Vic) (the WorkCover Act). The holding company of the Toll Companies is approved as a self insurer pursuant to the WorkCover Act. Its self insurance applies to the Toll Companies. On the face of it, Optus and the Toll Companies would commit an offence if they were not so insured or covered by an approval for self insurance: see s 7(1) of the WorkCover Act.
(b) The applicant is established by s 18 of the AC Act. It is responsible for the administration of the AC Act and the WorkCover Act (s 19 of the AC Act) and for that purpose it provides WorkCover insurance, it receives insurance premiums, it administers the WorkCover Fund comprised (in part) of such premiums, it receives and manages WorkCover claims, it pays compensation and so on: s 20 of the AC Act. The applicant has power to institute prosecutions for breach of the AC Act and the WorkCover Act: s 252 of the AC Act. The applicant is subject to "general control and direction" by the relevant Victorian Minister and can be subject to specific written direction by the Minister: s 20C of the AC Act (see also ss 34 and 34A). The board of the applicant is appointed by the Governor of Victoria in Council: s 24(2) of the AC Act.
(c) For the year ended 30 June, 2004 Optus paid premiums totalling $1,377,412 for the WorkCover insurance policy. As self insurers the Toll Companies pay contributions to the Fund pursuant to s 33A of the AC Act. The estimated contributions payable by the Toll Companies for 2004-2005 are $243,000.
(d) On 10 June 2004 the Minister received an application from Optus under s 100 of the SRC Act seeking a determination that Optus was eligible to be granted a licence under Part VIII of the SRC Act. Put generally, the basis of that application was that Optus was in competition with Telstra; that Telstra was covered by the SRC Act and that it was desirable in the interests of achieving a "level playing field" that Optus be subject to the same workers compensation scheme as Telstra. In its application Optus referred to a document entitled "The Australian Government’s Workers Compensation Scheme Eligibility for Coverage for Non-Commonwealth Corporations". That document lists some of the matters that may be taken into account by the Minister in exercising his discretion, including the effect on employees and on State and Territory schemes of the grant of a licence. The document provides in part:
‘The threshold test for a non-Commonwealth corporation to be declared eligible is to satisfy the Minister that they are 'in competition' with a Commonwealth authority. This is prescribed by section 100(c) of the SRC Act.

In making this judgement on competition, the Minister may have regard to evidence provided by the applicant, or available in the public arena, in the following areas:

. the market in which the applicant and the Commonwealth authority operate, including the composition of the market and/or the market share of the applicant and the Commonwealth authority;

. where competition exists, whether this is a substantial part of the applicants business.

. the substitutability between the goods, services and other provided/produced by the applicant and those of the Commonwealth authority.

It is at the discretion of the Minister to make a judgement on the above areas or on any other factors the Minister considers relevant in the making of his decision.

In addition to assessing threshold competition issues, the Minister will evaluate broad public policy considerations when deciding whether to declare corporations eligible under section 100( c) of the SRC Act. This discretionary power allows the Minister to make a declaration if the Minister is satisfied that it would be ‘desirable for this Act to apply to employees of a corporation’.

The Minister may consider the following public policy principles:

. the likely impact on employees of the corporation to the grant of a licence;

. the likely impact on the corporation to the grant of a licence;

. the likely impact on the integrity of the Commonwealth scheme of workers' compensation under the SRC Act;

. the likely impact on the operations of the State and Territory Government workers' compensation schemes.

The principles and threshold competition issues above are not intended to be exhaustive. Corporations, and other interested parties, are free to bring to the attention of the Minister any issues that bear on whether coverage under the SRC Act is desirable.’

Those issues were addressed in the application from Optus including the issues of the impact of any licence upon the employees of Optus and upon the operations of State and Territory workers’ compensation schemes. There was no suggestion in the application that the views being conveyed in it were other than the views of Optus.
(e) On 2 July, 2004 the Minister was provided with a brief prepared by a Departmental officer. That brief recommended that the Minister make the declaration under s 100 of the SRC Act. In relation to the issue of the effect upon Optus employees, the brief provided that the Department considered that the application "satisfied principle (a)". In reaching that conclusion it would not appear that the Department took any advice from anyone other than Optus. What seems apparent, however, is that at least some rights and entitlements of Optus employees could be affected by Optus being licensed under the SRC Act. In relation to Optus’ Victorian employees, the rights of those employees under s 82(1) of the AC Act would be replaced by entitlements under s 14 of the SRC Act. These are not exactly the same. Further, the entitlement of those employees to seek common law damages for workplace injuries would be changed. There are significant restrictions under both schemes upon the entitlement of employees to sue for common law damages. Nevertheless, under the Victorian scheme damages for economic loss are "capped" for serious injury at $1,006,760 and $438,000 for non economic loss. In contrast the maximum payable under the SRC Act is $110,000 for non economic loss. Of course, there may be other benefits to employees in being subject to the Commonwealth scheme, rather than the Victorian scheme.
(f) In relation to the effect upon State and Territory schemes, the brief provided:
‘Optus has over 9,000 employees across Australia, Appendix 1 provides a breakdown and the estimated premium for workers’ compensation coverage in each jurisdiction. It will be noted that some 60 per cent of Optus employees are based in NSW - the scheme with the largest premium pool - and a further 20 per cent in Victoria - the second largest premium pool.

Optus notes it contributes only a very small proportion of the total pool of premium funds received by the State schemes (less than 0.1 % nationwide). An estimation of the Optus contribution to each of the premium pool is set out in Appendix 1. Optus claims its withdrawal from the pool of funds collected by each state and territory authority would have minimal effect on the stability of the funds. The estimation provided by Optus in Appendix 1 supports this claim. Optus would be subject to experienced rated premiums in most jurisdictions.

The Productivity Commission’s Final Report states that actuarial advice to the Commission is that the impact of State and Territory schemes is unlikely to be significant. Further, on concerns relating to the effects that the loss of premiums could have on the viability of some risk pools and cross subsidies, the PC concludes that there could be some changes in premiums for those remaining if risk pools were to be reformulated, but, of itself, this would be unlikely to systematically increase (or decrease) premiums.

The Optus application must be considered in isolation from any similar application in assessing the likely impact on the State schemes. On this basis, the Department considers that if Optus is ultimately granted a SRC Act licence its departure from the State schemes will have a minimal effect.

It is considered Optus Administration satisfied principle (d)’


There is no dispute that the departmental officer did not seek the views of those responsible for the State or Territory schemes before making these comments.
(g) The Minister did not seek the views of the State or Territory authorities before making his determination.
(h) On 7 July, 2004 the Minister made the following declaration which was published in the Commonwealth of Australia Special Government Gazette dated Monday 19 July 2004:
‘For section 100 of the Safety, Rehabilitation and Compensation Act 1988 (the Act), being satisfied that it would be desirable for the Act to apply to the employees of Optus Administration Pty Limited (ACN 055 136 804), I declare that the corporation is eligible to be granted a licence under Part VIII of the Act.’


Annexed to that declaration was an "Explanatory Statement". Much of that Statement repeated the criteria set out in the document entitled "The Australian Government’s Workers Compensation Scheme Eligibility for Coverage for Non-Commonwealth Corporations" referred to above. However, the Statement also provided:

‘The Minister has determined that Optus Administration satisfies the principles used to assess applications by a corporation carrying on a business in competition with a Commonwealth authority or with a corporation that was previously a Commonwealth authority. On this basis, the Minister is satisfied that it would be desirable for the Act to apply to the employees of Optus Administration.

The notice declares that Optus Administration is eligible to be granted a licence under Part VIII of the Act.

A declaration made under section 100 is a disallowable instrument.

This declaration takes effect from Gazettal.’

(i) On 1 November, 2004 the applicant made a written submission to the Commission arguing that the Commission should not grant a licence to Optus until these proceedings are finalised or, alternatively, that conditions be imposed upon any licence so as to reduce what the applicant claimed were the consequences upon it of a grant of any licence.
(j) On 1 November, 2004 the Commission resolved to authorise its Chairman to sign a licence to come into operation on 1 December, 2004. In reaching that resolution, the Commission referred specifically to the provisions of s 104(2) of the SRC Act and to its satisfaction that "the grant of the licence will not be contrary to the interests of the employees of the licensee whose affairs fall within the scope of the licence". There is no information before me as to how the Commission reached that satisfaction or whether it afforded a right to be heard to those employees. Subsequently, on the further application of Optus, the date for the licence to come into operation was extended to 1 March, 2005.
(k) Pending compliance with the preconditions to the execution of the licence and its execution, Optus remains insured under the Victorian scheme.
(l) On 24 June, 2004 the Toll companies each applied for a declaration under s 100 of the SRC Act. On 30 August, 2004 a Departmental officer provided a brief to the Minister in relation to those applications. On 30 August, 2004 the Minister made the declaration. It is unnecessary to discuss any of the relevant documents in detail. For present purposes they are broadly similar to those discussed above in relation to Optus. There is no suggestion that either the Minister or the Department sought the views of the State or Territory authorities. The Commission has not yet resolved to issue a licence to the Toll Companies.
(m) Optus expects that the pre-tax financial benefits to it of being licensed under Part VIII of the SRC Act compared to its obligations to pay premiums under the AC Act and the WorkCover Act is $186,000 per month. The Toll Companies obligations would be reduced by approximately $175,000 in 2004/2005.
(n) The applicant says that the loss of premiums to the Fund from Optus and/or the Toll companies will have some effect upon the administration of the Fund and upon the capacity of the applicant to administer the scheme. There is a dispute as to the relative importance or consequence of that financial effect upon the Fund.

10 Broader issues were identified in the original Application and Statement of Claim, but these were subsequently amended. Following those amendments, a number of issues are not raised directly in these proceedings. First, no issue is raised about the rights of employees of Optus or of the Toll Companies including any right they may have to be heard in relation to the various decisions that are the subject of these proceedings. Second, the only issues raised in these proceedings as to whether the Commission, in granting a licence to Optus, has breached any obligation or duty it may have (whether to the applicants or to the employees of Optus or to anyone else), are:

(1) that the declaration made by the Minister (which was a pre-condition to the exercise of the powers of the Commission) was invalid; and/or
(2) that the relevant powers exercised by the Commission were beyond the legislative competence of the Commonwealth Parliament.

11 Third, no issue is taken that the declaration made by the Minister is invalid because the Minister failed to consider any matter that he was required to consider (including the effect of his determination upon the applicant and other State authorities) apart from the failure to afford the applicant a fair hearing. Finally, no issue is taken in these proceedings that the Minister was under an obligation to afford a fair hearing to the applicant by reason of the document entitled "The Australian Government’s Workers Compensation Scheme Eligibility for Coverage for Non Commonwealth Corporations".

12 As already mentioned, there are two bases upon which the applicant seeks relief. The first is that the applicant says that the Minister was obliged to afford a fair hearing to the applicant before making a determination and the Minister did not do so. The second is that the powers of the Commission and, in particular, the consequences of the exercise of those powers, are beyond the legislative powers of the Commonwealth Parliament.

13 Before considering these alleged bases of invalidity it is necessary to consider the question of the standing of the applicant to raise these issues. The respondents object that the applicant does not have standing to challenge the validity of the determination of the Minister or of the relevant provisions of the SRC Act.

14 Plainly enough, if the Minister was required to afford procedural fairness to the applicant before making the determination then the applicant has sufficient standing to seek to set aside that decision by reason of that breach. The respondents properly accepted that this was so. Obviously the respective arguments of the parties on standing reflect their arguments as to whether or not the Minister had an obligation to afford the applicant a fair hearing which is discussed below.

15 The issue of constitutional invalidity, however, may raise broader considerations. The applicant put its argument on standing squarely on the basis of the financial effect of the determination upon the WorkCover Fund and upon the applicant’s operations. The respondents argue that those effects are merely indirect and "commercial" and do not give the applicant standing to raise and pursue issues of constitutional invalidity.

16 It seems to me that the applicant may have standing to challenge the validity of the decisions of both the Minister and the Commission even if the invalidity of the relevant decision would not affect any right or entitlement that the applicant may have had or any duty that was owed to it directly. The applicant has statutory responsibility for the administration of the AC Act and the WorkCover Act. This includes the role of prosecuting those required to be insured under the WorkCover Act, but not so insured. If the applicant is correct that the declaration by the Minister is invalid then the licence sought by Optus and the Toll Companies would be invalid. In such circumstances the applicant would have statutory responsibilities to discharge. In particular, the applicant would have the statutory responsibility for the enforcement of the relevant State legislation.

17 Historically the responsibility for the enforcement of statutes was a responsibility of the Executive government. Historically the Attorney-General was the responsible officer in that regard. In relatively recent times particular Ministers have been afforded statutory responsibility for the enforcement of particular Acts. Ministers for Industrial Relations in relation to industrial legislation are an obvious example. Those Ministers have often been afforded express power to appear in industrial litigation: see, for example ss 44 and 471 of the Workplace Relations Act 1966 (Cth). In more recent times a practice has developed, particularly in the Commonwealth Government, where proceedings have been instituted by or proceedings have been taken against individual Ministers in relation to the enforcement of statutes for which they are responsible.

18 Historically the Attorney-General, being the Minister responsible for the enforcement of statutes, had standing to institute proceedings seeking declarations in relation to matters that would directly affect the operation of such statutes: see Croome v Tasmania [1997] HCA 5; (1997) 191 CLR 119 at 133-134. In accordance with that usual practice, the respondents accept that the Victorian Attorney-General would have standing to bring these proceedings.

19 I think that it should now be accepted that a Minister responsible for the enforcement of an Act also has standing to institute such proceedings: see Australian Competition and Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174 at [154]- [155]. In my view if a Minister were responsible for the administration and enforcement of the AC Act and the WorkCover Act, that Minister would have standing to seek a declaration that the SRC Act was invalid or that decisions made under that Act were invalid insofar as they directly affected the operation of the State Acts. Provisions of the SRC Act and decisions made pursuant to it purportedly affecting the obligations of persons to comply with the State Acts would relevantly and directly "affect" the operation of the State Acts. In my view a Minister with those responsibilities would not be limited to challenging the SRC Act or the relevant decision only in collateral proceedings, such as in a prosecution of Optus or the Toll Companies for failure to comply with the requirements of the State Acts. In my view such a Minister could bring proceedings directly against the Commonwealth or the relevant Commonwealth agencies to challenge the validity of the SRC Act and/or the decision made under it.

20 I can think of no reason why the applicant should not be in the same position as a Minister when the relevant statutes make the applicant responsible for the administration of the State Acts. In my view the statutory responsibility of the applicant for the administration of the Victorian scheme has the necessary consequence that the applicant has standing to seek orders from this Court as to whether acts of Commonwealth officers which would affect its statutory responsibilities are valid: see Broadmoor Hospital Authority v R [2000] 2 All ER 727 at 734, 740.

21 Consequently it is my view that the applicant has standing to challenge the validity of the determination and/or of the SRC Act, even if such a challenge did not involve a breach of some right or interest or entitlement directly affecting the applicant.

22 As already mentioned, the applicant alleges two grounds of invalidity. The first is that the Minister failed to afford the applicant procedural fairness before making his decision.

23 There is no dispute that if this ground were properly made out the result would be that the determination of the Minister was invalid: see Plaintiff S157/2002 v Commonwealth [2003] HCA 2; (2003) 211 CLR 476 at 506 [76]- [77], 508 [83]. In those circumstances it is unnecessary for me to consider the source of the relevant administrative law norms: see State of South Australia v Slipper (2003) 203 ALR 473 (Slipper) at 481-482 [19]-[20]. Whatever that source, the effect is the same.

24 The question of the extent or otherwise of the obligation to afford a fair hearing to the applicant in the circumstances of this case involves a number of issues. The first involves the meaning of s 100 of the SRC Act. It is clear that if the relevant corporation does not, as a matter of fact, answer the description set out in pars (a), (b) or (c) of s 100 then the Minister’s decision will be invalid. That is a "jurisdictional fact" which is a precondition to the exercise of the Minister’s discretion under that section. There is no issue raised in these proceedings as to the existence of that jurisdictional fact.

25 Once that jurisdictional fact exists, the question of whether a declaration should be made depends upon the Minister’s "satisfaction" that it is "desirable for this Act to apply to" employees of the relevant corporation. No criteria is imposed by the Act except the Minister’s satisfaction: see Slipper at 485. It is not suggested that the Minister was not relevantly "satisfied". This does not mean that the decision is effectively unreviewable: see Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 275-276. On the other hand, there is nothing in the discretion conferred on the Minister to suggest that the effect of his decision upon the applicant is a matter that the Minister is required to consider. Certainly the Minister’s discretion is sufficiently broad that the Minister may choose to consider that effect, but on the face of it there is no statutory obligation upon him to do so. There is nothing in the terms of the discretion conferred by s 100 of the SRC Act which would suggest that the Minister is required to take into account the interests of the applicant.

26 Notwithstanding that s 100 does not in its terms impose any obligation to consider the interests of the applicant, it is argued by the applicant that the implied obligation to afford natural justice has the necessary consequence that the Minister is required to consider the interests of the applicant. Obviously that depends upon whether or not that obligation is implied.

27 The applicant says the obligation to afford a fair hearing arose because the determination "affected its interests". On the basis of that effect the applicant says that it had a "legitimate expectation". On the other hand, the Minister says that the concept of "legitimate expectation" is not useful in determining whether procedural fairness is applicable and cites the recent decision of the High Court in Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1 (Lam).

28 I had cause to consider the effect of Lam and of the duty to afford a fair hearing arising from a "legitimate expectation" in McWilliam v Civil Aviation Authority [2004] FCA 1701, particularly at [30]-[34]. The view I reached was that the words "legitimate expectation" were still useful. However, the words were descriptive of a proposition, rather than a substantive source of rights. They serve to describe the proposition established in the cases, namely that the obligation to afford a fair hearing arises in a variety of circumstances which extend beyond strict "legal rights", but that the obligation does not necessarily arise merely because a person is affected by the relevant decision. Some of those cases and the principles to be derived from them were usefully summarised by Finn J in State of South Australia v Slipper [2004] FCAFC 164 at [93].

29 In my view the comments in Lam relied upon by the respondents do not have the effect that the words "legitimate expectation" have no continuing role in explaining when a duty to be heard arises, at least so long as the words are understood in this limited sense.

30 In this case the applicant says that the effect of the decision upon the WorkCover Fund and upon the discharge by the applicant of its statutory functions affected its "legitimate expectations" with the result that the applicant should have been afforded a right to be heard. The effects upon the WorkCover Fund and upon the applicant are the consequence of the relevant employers no longer being subject to the Victorian scheme.

31 It is difficult to see how that "indirect" consequence could give rise to a right to fair hearing. In any event, the breadth of the discretion conferred by s 100 of the SRC Act also tells against the right to be heard claimed by the applicant. A "legitimate expectation" is not an expectation of a fair hearing, but an expectation (be it objective or subjective) that the relevant person’s interests will not be prejudicially affected by the decision. The possibility that that expectation may not be realised gives rise to the obligation to afford a fair hearing: see FAI v Winneke [1982] HCA 26; (1982) 151 CLR 342 at 360; Minister for Immigration & Ethnic Affairs v Teoh [1995] HCA 20; (1995) 183 CLR 273 at 291-292. In this case the applicant needs to show that there is something in the relevant statutory scheme, or in the decision making process actually adopted by the Minister that has the consequence that the applicant had a "legitimate expectation" that the Minister would not make a determination which would prejudicially affect its interests. Given the breadth of the discretion it is difficult to see how the applicant could have any such legitimate expectation: see Bread Manufacturers of NSW v Evans [1981] HCA 69; (1981) 180 CLR 404 at 416-417; R v MacKellar Ex parte Ratu [1977] HCA 35; (1977) 137 CLR 461 at 476, 479-480 contrast Kioa v West [1985] HCA 81; (1985) 159 CLR 550 at 578-579, 585-587 - at least unless the decision made by the Minister was based upon some factual finding adverse to the applicant’s reputation (which is not alleged).

32 I note that the notice of the determination of the Minister is a "disallowable instrument": see s 121 of the SRC Act. This means that the notice must be laid before each House of the Parliament, either of which may disallow it by resolution. Such a disallowance has effect as if the notice is revoked: see ss 46A and 48 of the Acts Interpretation Act 1901 (Cth). Although certainly not determinative, the fact that the notice is a disallowable instrument serves to reinforce my view that the decision of the Minister is one involving a broad discretion based upon policy factors: see in a similar context RG Capital Radio Ltd v Australia Broadcasting Authority [2001] FCA 855; (2001) 185 ALR 573 at 584 [54]- [55]. Such a broad discretion is not one that can sensibly give rise to a legitimate expectation that the Minister will reach any particular decision.

33 For these reasons it is my view that the Minister was not required to afford the applicant a right to be heard before making the determination.

34 The second ground of invalidity alleged by the applicant is that the provisions of ss 104(1), 108(1) and 108A(7)(a) of the SRC Act, taken together, exceed the powers of the Commonwealth Parliament.

35 There are two steps in the argument as to invalidity. The first step relies upon the insurance power in s 51(xiv) of the Commonwealth Constitution which provides:

‘The Parliament shall, subject to this Constitution, have power to makes laws for the peace, order and good government of the Commonwealth with respect to insurance, other than State insurance; also State insurance extending beyond the limits of the State concerned.’

36 The applicant argues that the proviso in relation to State insurance means that the Commonwealth cannot legislate in relation to insurance conducted by a State and that that limitation is applicable to all Commonwealth legislative powers. This involves a relatively wide reading of the proviso. Usually, the effect of a proviso to the grant of a power is merely to limit the relevant power which it qualifies, not other powers: see Western Australia v Wilsmore [1982] HCA 19; (1982) 149 CLR 79 at 90, 98-99, 104-105. On the other hand, where a conferral of power is subject to some limitation or some special entitlement then in some cases there may be an inference that more general powers are also qualified so that the relevant limitation or entitlement would not be defeated.

37 In seeking to argue that the proviso limits not merely the insurance power, but such other legislative powers as may be applicable, the applicant relies upon the similarity of s 51(xiv) with the banking power in s 51(xiii) of the Commonwealth Constitution. The banking power also contains an exclusion for "State banking" which is in similar terms to that for "State insurance". The banking power in so far as it relates to "State banking" has been discussed by the High Court on a number of occasions, most importantly in Melbourne Corporation v The Commonwealth [1947] HCA 26; (1947) 74 CLR 31 (Melbourne Corporation) and in Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276 (Bourke). The Court has held that the proviso in respect of "State banking" imposed a restriction upon Commonwealth legislative power generally, rather than only a limitation upon the ambit of s. 51(xiii). In Bourke at 285-286 the Court said:

‘It is therefore necessary in the first instance to determine whether the words "other than State banking" in s. 51(xiii) impose a general limitation upon Commonwealth legislative power or are merely intended to confine the ambit of the banking power itself. The immediate difficulty with the second of these alternatives is that s. 51(xx) confers power with respect to financial corporations formed within the limits of the Commonwealth. If the words "other than State banking" do not restrict the scope of s. 51(xx), then the State banks themselves are subject to Commonwealth power and their activities are in the same position as those of other financial corporations over which the Commonwealth has power. That would be an extraordinary result, notwithstanding that at the time of Federation some State banks may not have been incorporated. Moreover, members of this Court have expressed the view that s. 51(xx) does not extend to financial corporations to the extent that they are engaged in banking: Bank of N.S.W. v. The Commonwealth [1948] HCA 7; (1948) 76 CLR 1 at pp 203-204, 256, 304. There is no reason to regard s. 51(xx) as standing in any special position in this respect. The general principle applicable in a case such as the present is that enunciated by Dixon C.J. in Attorney-General v. Schmidt [1961] HCA 21; (1961) 105 CLR 361 at 371-372, in these terms:

"It is hardly necessary to say that when you have ... an express power, subject to a safeguard, restriction or qualification, to legislate on a particular subject or to a particular effect, it is in accordance with the soundest principles of interpretation to treat that as inconsistent with any construction of other powers conferred in the context which would mean that they included the same subject or produced the same effect and so authorized the same kind of legislation but without the safeguard, restriction or qualification".’

38 All parties (including the Attorney-General for Victoria who intervened) submitted to me that the proviso in relation to "State insurance" should be treated in exactly the same way as that in relation to "State banking". In Re Wakim Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 Gummow and Hayne JJ at 581 [124] accepted that Commonwealth legislative powers should be limited in relation to "State insurance" in the same way as in relation to "State banking". In my view that is the correct approach.

39 The proviso in relation to "State banking" was specifically inserted into the draft Constitution at the request of the Legislative Assemblies of New South Wales and Victoria and the Legislative Councils of Tasmania and South Australia (Record of the Convention Debates – Sydney Session, 1897 at 1074). Some of those legislative bodies suggested that the proviso refer to "State banks" rather than "State banking", but it would appear that the two terms were treated by those at the conventions as being interchangeable (see at 1074-1075). The purpose of the proviso was so that each State could determine for itself whether and on what terms it wished to "advance the moneys of the State" (see Barton, Record of the Convention Debates – Sydney Session, 1897 at 1074; see also Glynn at 1075), subject to the banking business being conducted only within the State.

40 Nevertheless, there may be some uncertainty as to just what was meant by the term "State banking": see Glynn, Record of the Convention Debates – Sydney Session, 1897 at 1075. As at federation none of the colonies had a "central bank" performing those functions which in England were performed by the Bank of England. All of the colonies obtained such credit as they required from or through the issue of securities usually to the public and usually managed by private banks. None of the colonies issued their own paper money. Private banks issued paper money, except in Queensland where after 1893 paper money could not be circulated without a government stamp (see Treasury Notes Act, 1893 (Qld); Collier Banking in Australia (1934) at 23). It would not appear that it was in active contemplation at federation that any of the colonies would establish a central bank (although see the Report of the Victorian Royal Commission on State Banking (Victorian Parliamentary Papers, 1895 Vol 4) ("Banking Commission Report") discussed below), but some attempt was made in some colonies in the 1890s to better secure the value of paper money (for example, in New South Wales paper money issued by the private banks was guaranteed by the government pursuant to the Bank Issue Act, 1893 (NSW) and see the recommendations of the Banking Conference in Sydney in June, 1895 reported at 461 of Banking Commission Report). In any event, it is reasonably clear that "State banking" in the Constitution was not intended to refer to the operation of a central bank.

41 It is also clear that the term "State banking" did not refer to the activities of the State as a customer of a bank, whether a central bank or a private bank.

42 It seems reasonably clear that the term "State banking" referred to the business or activity conducted by the State (or colony) as a banker. A number of the Australian colonies did operate "government" banks. There would appear to have been three relatively distinct types. One was the post office banks. The first of these was established in Western Australia in 1863 (see Post Office Savings Bank 1863 (WA)), but soon they existed in all of the Australian colonies except South Australia. In Victoria, for example, there was a Post Office Savings Bank established pursuant to Part IV of the Post Office Statute, 1866 (Vic). Deposits were under the control of the Victorian Treasury and the Bank was operated in accordance with government direction.

43 The second distinct type was the government savings bank. Like the post office banks the purpose of the savings banks was to provide a secure repository for the savings of ordinary members of the public. However, they were intended to be more "commercial" than the post office banks. They operated their own accounts, were not government guaranteed and operated (more or less) independent of political control. The first of these was the Savings Bank of New South Wales which was established (or, more correctly re-constituted) in 1832 (see 2 William IV; No 13 (NSW)). The Governor of NSW was President of the Bank. He had power to appoint the trustees. The deposits were initially paid into State Treasury (see ss 6 and 7), but this requirement would seem to have been removed in 1834 (see 5 William IV; No 16 (NSW)). After that time the Bank (and a similar bank subsequently established in Port Phillip: see 5 Vict; No 5 (NSW)) would seem to have operated on its own accounts without direct financial support (including any express statutory guarantee) from the colonial Treasury: contrast Commissioners of the State Savings Bank of Victoria v Permewan Wright & Co Ltd [1914] HCA 83; (1914) 19 CLR 457 (Permewan Wright) at 461. It should be noted that outside of the major towns and cities of NSW the Savings Bank operated through post offices which acted as its agents (a practice that continued after the post offices were transferred to the Commonwealth after federation: see Opinions of the Attorneys-General of the Commonwealth of Australia, Vol 1 1901-1914 (1981) at 181.

44 A savings bank, similar to that in New South Wales, also existed in South Australia. The Savings Bank Act, 1875 (SA) constituted (or more correctly, reconstituted) the Savings Bank of South Australia as a statutory authority comprising trustees appointed by the Governor, but made no provision (until an amendment in 1912) for the Bank to be funded or guaranteed by the State Treasury: the history of the bank is discussed by Isaacs and Rich JJ in Bank Officials’ Assoc (SA Branch) v Savings Bank of South Australia [1923] HCA 25; (1923) 32 CLR 276 at 288-289.

45 In Victoria separate savings banks were established in various regional areas by the Savings Banks Act (1890). These banks were not under government control. Like those in New South Wales and South Australia initially they were not government guaranteed, although a guarantee was provided administratively soon after. By the Savings Banks Amendment Act of 1896 the various savings banks and the post office banks in Victoria were amalgamated into the body corporate called the Commissioners of the Savings Bank of Victoria. Deposits made with the Commissioners were guaranteed by the colonial government (the history of the Commissioners is discussed by Griffiths CJ in Permewan Wright at 461-463).

46 The third sort of bank was a trading bank established to use government moneys and/or government credit for the purpose of encouraging development, particularly in rural areas. In 1894 Western Australia established an Agricultural Bank (see Agricultural Bank Act, 1894 (WA)) the capital of which was provided by the colony, or guaranteed by it (see ss 3, 5-9). In 1896 South Australia established a "State Bank" (see State Advances Act, 1895 (SA)) which was government guaranteed and funded by the government Treasury. In contrast to its Savings Bank, which was treated as an independent repository of deposits, the State Bank was used as a vehicle of government policy, particularly in relation to rural lending.

47 At and around federation other colonies were contemplating establishing similar banks to the State Bank in South Australia, largely in response to the banking and financial crisis that began in the early 1890s. Indeed, after federation the Savings Bank of NSW was re-constituted and eventually became the Rural Bank of NSW – a bank which held its property on behalf of the State and which was guaranteed by the State: see Rural Bank of NSW v Hayes [1951] HCA 58; (1951) 84 CLR 140 at 146-151. The Queensland Agricultural Bank was established in 1902 (Agricultural Bank Act 1901 (Qld)) and the Agricultural Bank of Tasmania in 1907 (see State Advances Act 1907 (Tas) and Glenorchy v Agricultural Bank (1936) 31 Tas LR 75). Each of these was similar in form to the South Australian State Bank.

48 It is not clear that as at the date of federation all of these three types of government banks were all described as "State banking". In particular it is not clear that government savings banks without government funding or guarantee (such as that in NSW or in South Australia) were considered to fall within the term "State banking" (contrast Starke J in Melbourne Corporation at 69 and contrast Quick & Garran The Annotated Constitution of the Australian Commonwealth (1901) at 577-578).

49 At the 1891 Constitutional Convention it seems to have been accepted that the term "State banking" included the "post office" savings banks (see Record of the Convention Debates – Sydney, 1891 at 685). In the Banking Commission Report (at vi) the Commissioners treated the Victorian Post Office Bank as a "government institution", but only treated the Savings Bank in Victoria as being "practically" a government institution after their deposits were guaranteed by the Treasurer and they were subject to government instruction. The Report described the new bank, which it recommended should be formed from the merger of the Post Office Bank and the Savings Bank, as a "State Bank" (see at vii). The Commission proposed that that bank should have a government guarantee and be subject to direction. However, it also proposed that the Bank have the role and function of a central bank - the exclusive responsibility for issue of paper money, the role of managing government borrowings and the role of holding the "trust" accounts of the government (see at viii, xiv-xv contrast xix-xxi). The proposal to establish a central bank was not adopted.

50 At the later Conventions in 1897 and 1898 the term "State banking" seems to have been used to refer to banking conducted by a State government and either funded by it or guaranteed by it. In particular, the trading bank established in South Australia – the State Bank - was clearly understood as falling within the term (see Isaacs and Cockburn, Record of the Convention Debates – Adelaide Session, 1897 at 778). So too, did the Agricultural Bank in Western Australia: see Forrest, Record of the Convention Debates – Sydney Session 1897 at 1074. It is not clear, however, that the Savings Bank of South Australia was similarly thought to do so at that time.

51 Insofar as "State banking" is concerned the issue now is largely of academic interest as none of the States any longer operate a "government bank". However, a number of State governments still operate insurance businesses, particularly in relation to workers compensation, compulsory motor vehicle insurance and so forth. A number of these government insurance businesses no longer have an express government guarantee. They are expected not only to meet their costs and expenses through their "commercial" activities, but in some cases are expected to pay an annual "dividend" to the relevant State government.

52 The reason for inserting the proviso in relation to "State insurance" in s 51(xiv) of the Commonwealth Constitution would seem to have been the same as for "State banking". As at federation none of the Australian colonial governments were carrying on an insurance business, but the New Zealand government had established a Government Life Assurance business in 1869 which was guaranteed by the New Zealand government (see Black CJ in Aust Health Insurance Assoc v Esso (1993) 41 FCR 450 (Esso) at 457; Mascarenhas Public Enterprise in New Zealand (1982) at 36-37 and see O’Connor and Glynn, Record of the Convention Debates – Adelaide Session, 1897 at 780). The purpose of the proviso in relation to "State insurance" was so that each Australian State could determine for itself whether and on what terms it wished to establish its own insurance businesses (as New Zealand had done), providing that the business was only conducted within the State. Presumably it was also to accommodate New Zealand if that colony decided to join the federation.

53 As no relevant distinction can be drawn between the provisos in the banking power and the insurance power, then it follows that the reasoning in Bourke quoted above is equally applicable to the insurance power. In my view the proviso in relation to "State insurance" imposes a restriction upon Commonwealth legislative power generally rather than only a limitation upon the ambit of s. 51(xiv). Even if the relevant provisions of the SRC Act could be supported by a power other than the insurance power (see above), the qualification in relation to "State insurance" would also be applicable to that power.

54 There was no dispute before me that the business conducted by the applicant is "State insurance" for the purposes of s 51(xiv). The Minister expressly conceded as much. I proceed on the basis that the concession was properly made. Given the statutory functions of the applicant and its structure and (most importantly) its relationship to the Victorian Government, in my view the applicant is part of "the State" of Victoria for the purposes of the Commonwealth Constitution: see State Bank of NSW v Commonwealth Bank [1986] HCA 62; (1986) 161 CLR 639 at 648-652; SGH Ltd v FCT [2002] HCA 18; (2002) 210 CLR 51 (SGH) at 67-68, 94-95, 103.

55 In my view this is so whether or not the operations of the applicant were funded or otherwise guaranteed by the Victorian Treasury: contrast the Queensland State Government Insurance Office considered in SGH at 70. The applicant is not funded or even expressly guaranteed from "State" resources, but is funded from premiums. Although this may not be critical to the question whether the applicant is "the State", it may be more important to the question whether the business conducted by it is "State insurance". As discussed above, this may have been a distinguishing feature of "State banking" as that term was understood at federation. I also note that Black CJ would seem to have identified this as a distinguishing feature of "State insurance" in Esso at 456-457.

56 On the other hand, once the applicant has been characterised as part of the State then it may be that premium income, once received by the applicant, can be treated as "State resources" for this purpose (assuming that it is necessary to do so), even though it is paid into the Fund and can only be used for the purposes set out in the legislation. It may be sufficient that the business can be considered as insurance business carried on by the State: see Melbourne Corporation at 52, 65, 86.

57 Given the concessions that have been made it is unnecessary to consider this matter in any greater detail. I proceed on the basis that the relevant activities of the applicant comprise "State insurance" and that the general powers of the Commonwealth Parliament are qualified in relation to "State insurance".

58 The second step in the applicant’s argument is that ss 104(1), 108(1) and 108A(7)(a) of the SRC Act is a law which comes within the qualification in relation to "State insurance" and is consequently beyond Commonwealth legislative power. The applicant says that the relevant provisions "touch and concern" State insurance in a way that is not merely "insubstantial, tenuous or distant" and is consequently not a law "with respect to" "insurance other than State insurance".

59 This requires the interpretation of the proviso. There is no dispute that the relevant test is that stated by the High Court in Bourke at 288-289:

‘The only satisfactory solution to this problem is to accept that there is no exclusive State power to make laws with respect to State banking. But the words of s. 51(xiii) still require that, when the Commonwealth enacts a law which can be characterized as a law with respect to banking, that law does not touch or concern State banking, except to the extent that any interference with State banking is so incidental as not to affect the character of the law as one with respect to banking other than State banking: see Fairfax v. Federal Commissioner of Taxation [1965] HCA 64; (1965) 114 CLR 1 at p 7. Put another way, the connexion with State banking must be "so insubstantial, tenuous or distant" that the law cannot be regarded as one with respect to State banking: Melbourne Corporation (1947) 74 CLR at p 79. Of course, these are the tests used in the familiar process of characterization. But they are employed in the context of an embracing Commonwealth power expressed as one to make laws with respect to banking other than State banking. They are not employed in the context of an exclusive State legislative power with respect to State banking. So, if a law is not one with respect to banking, it is not subject to a restriction that it must not touch or concern State banking.
This conclusion is in accordance with an observation made by Dixon C.J. in Attorney-General v. Schmidt (1961) 195 CLR at p 372 after enunciating the statement of general principle concerning restrictions contained in paragraphs of s. 51, which statement is set out above. Speaking in relation to the power in s. 51(xxxi) to make laws with respect to the acquisition of property on just terms, with which the case was concerned, his Honour said of the general principle that it
"does not apply except with respect to the ground actually covered by par. (xxxi) of s. 51. For example, no one would doubt that, under the power to make laws with respect to bankruptcy, property of the bankrupt may be sequestrated and property of others which has been left in his order and disposition may be vested in the Official Receiver and that s. 51(xxxi) has no bearing on the matter. At the same time, if a law was made under which a piece of land was acquired for a Bankruptcy Office, s. 51(xxxi) would govern the legislation and not s. 51(xvii). It must be borne in mind that s. 51(xxxi) confers a legislative power and it is that power only which is subject to the condition that the acquisitions provided for must be on just terms".’

60 The applicant (supported by the Attorney-General for Victoria who intervened on the constitutional question) says that the relevant provisions of the SRC Act can be characterised as a "law with respect to insurance". This may be accepted.

61 The applicant then says that the law "touches and concerns State insurance".

62 Both the applicant and the Attorney-General for Victoria conceded that the financial impact of a Commonwealth law upon the business of the applicant was not sufficient in itself to establish that the law relevantly "touches and concerns" State insurance (contrast the use of the word "affect" by Dixon J in Melbourne Corporation at 78). In my view this concession was plainly correct. The Commonwealth plainly has the power to regulate insurance "other than State insurance". For this purpose undoubtedly it could enact legislation relating generally to contracts of insurance. Undoubtedly it could enact legislation to license and regulate insurers. All of that legislation could have significant effects in the market place and consequently could have significant financial consequences upon "State insurance". It could hardly be doubted, however, that such legislation would be valid, providing that it did not purport to bind "State insurance" or otherwise directly apply to it. In my view legislation which merely has financial consequences upon "State insurance" does not limit the freedom of a State to determine for itself whether and on what terms it wishes to "advance the moneys of the State" for the purpose of carrying on an insurance business. Properly considered, such legislation does not "touch and concern State insurance". Notwithstanding the proviso, the States "must accept [the effects of federal law] as part of the system enjoyed by the whole community" (Bank of NSW v Commonwealth [1948] HCA 7; (1948) 76 CLR 1 (Bank of NSW) at 337; Melbourne Corporation at 84-85 per Dixon J)

63 The applicant says that the SRC Act does not simply have a financial effect upon the applicant. The applicant puts two arguments in this regard. First, in its written submissions the applicant argued that the SRC Act "interferes with and constrains the scheme of State insurance". This argument seems to me to treat "State insurance" as denoting or at least including the policies and purposes intended to be achieved by the Victorian Parliament under the AC Act and the WorkCover Act (what is described in the submissions as "the scheme of State insurance"). I think that this involves a misunderstanding of the words "State insurance" in s 51(xiv) of the Commonwealth Constitution. What is protected by the proviso is the decision by the Victorian government about whether and how it will carry on an insurance business, the contractual terms upon which it chooses to do so and the business actually conducted by the State. But the proviso does not afford protection to the general "scheme" of workers compensation reflected in the AC Act or the WorkCover Act.

64 The second argument put by the applicant is that "insurance" consists of or includes indemnities granted by or pursuant to legislation: see Esso at 454-455, 493. Consequently, it is said, the compulsory indemnity arrangements upon Optus and the Toll Companies imposed under the AC Act and the WorkCover Act are "insurance". As the applicant is relevantly "the State" those arrangements involve "State insurance". The effect of s 108A(7)(a) of the SRC Act is to interfere with those indemnity arrangements. Because the Commonwealth law directly affects the indemnity arrangements under the AC Act and the WorkCover Act it "touches and concerns" State insurance and is invalid.

65 The Attorney-General for Victoria put an alternative submission, or at least put the submission in a different way. The Attorney-General argued that the test proposed in Bourke as set out above has the effect that the Commonwealth cannot enact a law which can be characterised as a law on "State insurance". Section 108A(7)(a) of the SRC Act can be so characterised. It is a law which "touches and concerns" State insurance, being a law "with respect to the conduct of customers of the [State insurer] in their capacity as such customers" (see Latham CJ in Melbourne Corporation at 52). As the Victorian Solicitor General put it, if the Commonwealth had legislative power over "State insurance" that power would have supported the enactment of s 108A(7)(a) of the SRC Act: see Melbourne Corporation at 49-50, 64, 79-80, 89; contrast Bank of NSW at 197-201. As the characterisation test for the proviso was the same test as that for the grant of a legislative power, it necessarily followed that s 108A(7)(a) fell within the proviso and was invalid.

66 The effect of these arguments, as I understand them, is that any Commonwealth law which directly affects the relationship between a State insurer and someone indemnified by that State insurer is invalid. This would include an indemnity provided under a valid State Act, at least where the indemnity could be described as "insurance". The Attorney-General for Victoria limited his argument to those circumstances where the indemnity was mandatory.

67 The width of these submissions can best be highlighted by giving some examples. Assume that Victoria passed an Act prohibiting anyone from offering life insurance in that State except the State insurer. The Commonwealth passed an Act establishing a Commonwealth insurer and authorising it to offer life insurance to defence personnel, Commonwealth public servants and Commonwealth pensioners including in Victoria. If the submissions put by the applicant and by the Victorian Attorney-General were correct then the Commonwealth law would be invalid, save only for some argument that the State law was invalid. Similarly, assume that Victoria passed a Landowners Liability Act creating a statutory liability upon landowners towards entrants onto their land and requiring landowners to insure with a State government insurer against such liability. The Commonwealth legislated to licence various insurers to offer insurance products throughout Australia, including insurance against any statutory liability imposed against landowners. The Commonwealth legislation specifically provided a regime for "double insurance" the effect of which was that a person holding an insurance policy was not required to insure again against the same risk and that, if they did, the insured could not recover twice for the same damage. Again, if the submissions of the applicant and the Attorney-General were correct then the Commonwealth legislation would be invalid at least to the extent that it purported to exempt Victorians from the requirement to insure with the State insurer.

68 The Minister, on the other hand, argued that s 108A(7)(a) of the SRC Act did not directly concern the relationship between the State insurer and its "customer". Rather the provision operated at a more fundamental level of permitting those required under the State scheme to be "customers" to exercise a choice as to whether or not to have that status. It did not directly interfere with the relationship of customer and insurer, but provided a mechanism by which a person could choose to be insured or not. The Commonwealth Solicitor General submitted that s 108A(7)(a) of the SRC Act was a law dealing with the general "milieu" of insurance, not a law dealing with State insurance.

69 The difference between these submissions is fundamentally a difference as to the meaning and extent of the proviso and, in that context, a difference as to the proper interpretation of what the High Court said in Bourke as set out in par 59 above. That is understandable. It is not altogether clear what that quotation in Bourke means. However, it does not seem to me that it can mean what the applicant and the Attorney-General for Victoria submitted that it means. It seems to me that:

(a) it is clear that the High Court has rejected any test based upon an exclusive State power (see Bourke at 288). This being the case, the High Court could not have proposed a test for the proviso of whether the relevant law can be characterised as a "law with respect to State banking". Such a test would have been a test of an exclusive State power.
(b) in any event a test for the proviso of whether the relevant law can be characterised as a "law with respect to State banking" would be contrary to principle. Commonwealth legislative powers are read broadly because the conferral of such power is "with respect to" the relevant subject matter and because of the general principles of interpretation of a written Constitution: see Amalgamated Society of Engineers v Adelaide Steamship Co Ltd [1920] HCA 54; (1920) 28 CLR 129 at 149-150; Bank of NSW at 332-334. To apply the same test to a proviso is wrong in principle. It would have the effect (as was argued in this case) that the Victorian Parliament, by creating a mandatory insurance scheme involving a State insurer, could effectively exclude all Commonwealth legislation on insurance in that State, save only for any limitations upon the powers of the Victorian Parliament (such as those derived from s 92 of the Commonwealth Constitution or from the principles discussed in Re Residential Tenancies Tribunal of NSW; Ex parte Defence Housing Authority [1997] HCA 36; (1997) 190 CLR 410). Not only does this treat the proviso as an exclusive power, it treats it as a power which is capable of largely if not entirely abrogating the primary grant. There is nothing in the mischief to which the proviso was directed or in the terms of the grant or in the general principles of constitutional interpretation which suggest that that consequence properly reflects the meaning of s 51(xiv) of the Commonwealth Constitution.
(c) the issue before the Court in Bourke was not solely how to interpret the proviso, but also how to apply the proviso when there were other legislative powers which might support the relevant law. In my view the comments in Bourke in respect of characterisation need to be understood in that context.
(d) properly considered, what Bourke holds is that:

a. In light of the proviso, the only power that the Commonwealth has to legislate "with respect to" State banking is the banking power in s 51(xiii) of the Commonwealth Constitution. Consequently if the law can be characterised as a law with respect to "State banking" then the only power upon which the Commonwealth can rely to support that law is the "banking" power. This is similar to the approach taken in relation to the acquisition power in s 51(xxxi) of the Constitution: see Bourke at 288-289.

b. When the law is so characterised as a law with respect to State banking, the question is whether the law falls within the "embracing Commonwealth power" (see Bourke at 286 and 289) being a law "with respect to banking other than State banking".

c. "State banking" means the "business of banking conducted by a bank owned or controlled by a State" (see Bourke at 284).

(e) the same analysis is applicable to "State insurance".

70 So understood, the Commonwealth has legislative power pursuant to s 51(xiv) of the Commonwealth Constitution to legislate generally in relation to insurance "other than State insurance". As was pointed out although (in relation to the banking power) by Latham CJ in Melbourne Corporation this means that the Commonwealth cannot legislate so as to affect directly the internal organisation of a State insurer. Nor can it legislate so as to affect directly the terms and conditions on which a State insurer offers insurance. Nor can it legislate so as to prevent directly persons entering into insurance arrangements with a State insurer, at least so long as the relevant "State insurance" does not extend beyond the limits of the relevant State. However, where the law is a general law that incidentally affects a State insurer (e.g. it affects the market place in which the State insurer operates) then the law does not fall within the proviso. It is clear from the mischief to which the proviso was directed, that what was envisaged was the continuing capacity of the State insurance business to operate in a commercial marketplace. The use of the words "State insurance business" to describe the meaning of "State insurance" needs to be understood in that context: see NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48; (2004) 79 ALJR 1 at 14 and see Melbourne Corporation at 51-52, 86; Bank of NSW at 193-194 contrast at 331. There is no basis for treating the words "State insurance" as extending to State laws requiring persons to insure with a State insurer or to State laws conferring an economic monopoly on a State insurer. In my view such State laws are not themselves "State insurance".

71 Properly analysed, I do not think that the relevant provisions of the SRC Act have any effect on "State insurance" so understood. What they affect is the mandatory requirement that employers in Victoria be insured in relation to workers compensation liability, unless they are authorised to be "self insured". In my view that requirement is not "State insurance" even if the designated insurer is a "State insurer".

72 The Commonwealth Minister submitted that "a State cannot enlarge the ambit of the words "State insurance" (or "State banking") by the purported conferral of a monopoly" on the State authority. I would prefer to say that a Commonwealth law which is inconsistent with State legislation only in that it removes restrictions or obligations on those within the market place which restrictions or obligations have been imposed by State legislation is not a law "touching or concerning" State insurance merely by reason of that inconsistency.

73 There is nothing in the SRC Act which (in form or substance) prevents a person holding a licence under that Act from insuring their liabilities under the SRC Act whether with a State insurer or anyone else. Nor is there any licence condition imposed upon Optus which would have that effect. It may be that even if there were such a restriction the SRC Act and/or the licence would still be valid (an issue not argued and which I do not need to decide), but in the absence of any such restriction I am unable to see how the SRC Act relevantly "touches or concerns" State insurance.

74 Certainly there is nothing in the SRC Act which would seem to me to be "directed" against "State insurance", properly understood. The discrimen of the relevant provisions of the SRC Act is not "State insurance". Whilst s 108A(7)(a) of the SRC Act does provide an exception from the mandatory insurance scheme in the AC Act and the WorkCover Act, for the reasons already discussed that mandatory scheme is not itself "State insurance". Indeed, in at least some other States and Territories where there are mandatory requirements for workers compensation insurance, retail insurance is provided by private sector insurers, rather than by "State insurance": see Productivity Commission Inquiry Report National Workers’ Compensation and Occupational Health and Safety Frameworks (2004) at 311-315.

75 Consequently I do not think that the relevant provisions of the SRC Act are invalid for any lack of legislative power in the Commonwealth Parliament.

76 For these reasons the application must be dismissed.

I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Selway.

Associate:


Dated: 17 February 2005

DAY 1 Counsel for the Applicant:	P Hanks QC with R Orr
Solicitor for the Applicant:	Deacons
Counsel for the First Respondent:	J Beach QC with D Star
Solicitor for the First Respondent	Australian Government Solicitor
Counsel for the Second Respondent:	F Hampel SC with C Horan
Solicitor for the Second Respondent:	Phillips Fox
Counsel for the Third Respondent:	J Middleton QC with T Di Lallo
Solicitor for the Third Respondent:	Baker and McKenzie
DAY 2 Counsel for the Applicant:	P Hanks QC with R Orr
Solicitor for the Applicant:	Deacons
Counsel for the First Respondent:	D Bennett QC with D Star
Solicitor for the First Respondent:	Australian Government Solicitor
Counsel for the Second Respondent:	C Horan
Solicitor for the Second Respondent:	Phillips Fox
Counsel for the Third Respondent:	No appearance
Counsel for the Intervener:	P Tate SC with M Moshinsky
Solicitor for the Intervener:	Victorian Government Solicitor
Date of Hearing:	25 November 2004 28 January 2005
Date of Judgment:	17 February 2005