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High Court of Australia |
MUTUAL POOLS AND STAFF PTY. LIMITED v THE COMMONWEALTH OF AUSTRALIA [1994] HCA 9; (1994) 179
CLR 155, (1994) 94 ATC 4103, (1994)
119 ALR 577, (1994)
Aust Sales Tax Cases
85-181 , (1994) 27 ATR 357, (1994) 68 ALJR 216
F.C. 94/005
Number of pages - 51
Constitutional Law (Cth)
HIGH COURT OF AUSTRALIA
MASON CJ(1), BRENNAN(2), DEANE(3), DAWSON(4), TOOHEY(4), GAUDRON(3) AND
McHUGH(5) JJ
CATCHWORDS
Constitutional Law (Cth) - Powers of Commonwealth Parliament - Taxation - Acquisition on just terms - Sales tax imposed on swimming pools - Contravention of requirement that laws imposing taxation deal only with imposition of taxation - Act providing for refund of tax - Refund to builder where tax not passed on to owner - Refund to owner where tax passed on - Validity - Whether law with respect to taxation - Whether acquisition of builder's property otherwise than on just terms - The Constitution (63 and 64 Vict. c. 12), s. 51(ii), (xxxi), (xxxix), 61 - Swimming Pools Tax Refund Act 1992 (Cth), s. 4.
HEARING
1993, February 10; 1994, March 9ORDER
Answer the questions in the case stated as follows:
2. Is the (Swimming Pools Tax Refund Act) invalid in its application to the
circumstances of this case?
Answer: No.
Liberty to the Defendant to file in this Court and serve on the Plaintiff
within seven days written submissions with respect to
costs. Liberty to the
Plaintiff to file and serve on the Defendant within seven days of such service
written submissions in reply.
DECISION
MASON CJ This case, which was stated by McHugh J, arises out of
The facts
2. The plaintiff is a builder of swimming pools in situ. As a
result of the Sales Tax Laws Amendment Act 1986 (Cth), the Sales Tax
Assessment Act (No.1) 1930 (Cth) ("the Assessment Act"), when read
as one with the Sales Tax Act (No.1) 1930 (Cth) ("the Taxing Act"),
had the effect of imposing a tax on so much of a swimming pool as
is constructed in situ ("the in situ pool tax"). The plaintiff
instituted the earlier proceedings in this Court in 1990 and obtained
the declaration, already mentioned, that the provisions of the
Assessment Act were invalid. However, prior to the decision of this
Court in that case, the Swimming Pool and Spa Association of Australia
Ltd. ("SPASA"), a body representing the swimming pool and spa
industry, of which the plaintiff was a member, made an agreement on
behalf of its members with the Commissioner of Taxation on behalf of
the defendant to the effect that:
(i) notwithstanding the challenge to the validity of the in situ pool
tax, the plaintiff and other SPASA members would pay the sales
tax purportedly exacted by the impugned legislation pending this
Court's decision; and
(ii) in the event the challenge was successful, all amounts paid by
the plaintiff and other SPASA members as in situ pool tax would
be refunded, together with interest at the rate specified in the
Taxation (Interest on Overpayments) Act 1983 (Cth).
3. On 30 December 1990, the plaintiff made an agreement with Mr and
Mrs Chaplin for the construction of a swimming pool in situ, and the
plaintiff proceeded to construct the swimming pool. The plaintiff
paid to the Commissioner of Taxation the sum of $1,522 as sales tax in
respect of the construction of the swimming pool. The sum of $1,522
was passed on by the plaintiff to Mr and Mrs Chaplin in whole and has
not been refunded in whole or in part to Mr and Mrs Chaplin.
4. Following the decision by this Court that the in situ pool tax
was invalid, the Commonwealth enacted the Swimming Pools Tax Refund
Act 1992 (Cth) ("the Refund Act"), which provides for the refund of
taxes paid pursuant to the invalid in situ pool tax provisions.
Section 4 of the Refund Act relevantly provides:
"(1) Except as provided by this section, theSection 3 of the Refund Act contains a number of definitions.
Commonwealth is not liable to make any in situ pool tax
refund payment.
(2) If, before the commencement of this Act or within
2 years after its commencement, the pool builder in respect
of an in situ pool tax payment has made a declaration to the
Commissioner ... of either or both of the following kinds:
(a) that a specified amount, being the whole or
part of the in situ pool tax concerned, was not
passed on to the pool purchaser in relation to the
swimming pool concerned;
(b) that a specified amount, being the whole or part
of any of the in situ pool tax concerned that was
passed on to the pool purchaser in relation to the
swimming pool concerned, has been refunded to the
pool purchaser;
then the Commonwealth is only liable to make the in situ
pool tax refund payment to the pool builder to the extent
that it equals the sum of:
(c) the amount of the tax that was not passed on; and
(d) the amount of the tax that was refunded.
(3) If, before the commencement of this Act or within
2 years after its commencement, the pool builder in respect
of an in situ pool tax refund payment and the pool purchaser
in relation to the swimming pool concerned have jointly made
a declaration to the Commissioner, in a form approved by the
Commissioner for the purpose, that a specified amount, being
the whole or part of any of the in situ pool tax concerned
that was passed on to the pool purchaser, has not been
refunded to the pool purchaser, then subsection (4) applies.
(4) If a declaration is made under subsection (3), the
Commonwealth is liable to make so much of the in situ pool
tax refund payment as equals the amount of the tax that was
passed on to the pool purchaser and not refunded, but is
liable to make the payment to the pool purchaser instead of
to the pool builder."
5. Other provisions in the Refund Act confer a statutory right to
interest in favour of any person entitled to claim a refund under
s.4 ((2) s.5.) and remove any other right to claim interest, whether
on the basis of a refund agreement or otherwise ((3) s.8.). Other
provisions deal with the adjustment of interest where the pool
purchaser has received a refund from the pool builder ((4) s.6.)
and compensation to a pool builder where interest is payable to a pool
purchaser and not to a pool builder ((5) s.7.).
6. The plaintiff has requested that the defendant repay to the
plaintiff the sum of $1,522, being the payment made pursuant to
the Refund Agreement, or pursuant to the invalid in situ pool tax
provisions, by the plaintiff in respect of the swimming pool
constructed for Mr and Mrs Chaplin. The defendant has refused to
repay that sum to the plaintiff on the basis that it is liable to
repay only the sum provided for under the Refund Act and, as the tax
was passed on to Mr and Mrs Chaplin and not refunded to them by the
plaintiff, the defendant has no liability to make any repayment to the
plaintiff. The plaintiff now contends that the Refund Act is invalid.
7. The questions reserved by the case stated for the consideration
of the Full Court are:
"1. If the said amount of $1,522 was paid pursuant to the
SPASA agreement, was the Defendant legally obliged,
before the Refund Act was enacted, to repay the said
amount to the Plaintiff by reason of the facts and
matters referred to in paragraphs 5, 6, 7, 8 and 10
hereof.
2. Is the Refund Act invalid in its application to the
circumstances of this case?"
Question 1
8. The facts and matters referred to in pars 5, 6, 7, 8 and 10 of
the case have been stated in my summary of the facts. In essence, the
question raised is whether, before the enactment of the Refund Act,
the Commonwealth was liable to repay the amount in question to the
plaintiff in consequence of the two agreements, the plaintiff's
membership of SPASA, the construction of the pool by the plaintiff for
the Chaplins pursuant to the agreement with them, the payment of the
amount by the plaintiff to the Commissioner of Taxation in respect of
the construction of the pool and the declaration of invalidity of the
in situ pool taxation provisions. By consent of the parties, the
question is to be answered in the affirmative.
Question 2
(a) The source of power
9. There are a number of provisions of the Constitution which could
constitute the source of legislative power to bar or modify the
liability otherwise resting upon the Commonwealth pursuant to the
SPASA agreement to refund moneys received by the government as a
payment of tax under a taxing statute which is subsequently declared
to be invalid. It is unnecessary to examine these provisions in any
detail, as the argument in this Court ultimately proceeded upon the
basis that the Refund Act was within a head of power conferred by the
Constitution. It is clear that either s.51(ii) or s.51(xxxix) in
conjunction with s.61 authorizes the enactment of the Refund Act.
10. This approach accords with the views expressed by Rich J,
Starke J and Dixon J in Werrin v. The Commonwealth ((6) [1938] HCA 3; (1938) 59
CLR 150.). In that case, s.12A of the Sales Tax Procedure Act 1934
(Cth) barred recovery of certain payments made as sales tax on the
ground that the goods had gone into use or consumption before the
relevant transactions of sale allegedly attracting duty. Rich, Starke
and Dixon JJ upheld the validity of the section. The basis for the
conclusion reached by Rich J is not at all clear. His Honour said
that ((7) ibid. at 161.):
"it was clearly within the competence of the FederalStarke J considered that s.51(ii) conferred power to enact
Parliament to say that a sum of money erroneously collected
under a tax Act by administrative officers acting in good
faith should be retained".
"the enforcement of the taxation laws ... is the function of
the government under sec.61 and it is a matter incidental to
that function or power to receive payments on account of tax
including sums which, through some mistake of fact or law,
are collected although not strictly payable". (emphasis
added)
11. In the present case the plaintiff seeks to recover moneys paid
as tax under a taxing statute which was invalid, whereas in Werrin
the payment was made under a valid taxing statute which, on its true
construction, did not impose tax on the plaintiff in respect of the
relevant transactions of sale. But this difference is not material in
determining whether the Parliament has power to enact a law such as
the Refund Act. The difference would be material in a case where the
invalidity of the taxing statute had its origin in some want of
legislative power or irremediable contravention of a constitutional
prohibition ((11) Antill Ranger and Co. Pty. Ltd. v. Commissioner for
Motor Transport [1955] HCA 25; (1955) 93 CLR 83; affd [1956] UKPCHCA 5; (1956) 94 CLR 177; Barton v.
Commissioner for Motor Transport [1957] HCA 50; (1957) 97 CLR 633.). However, here
there was no absence of legislative power; the taxing provision was
invalid by reason of non-compliance with s.55 of the Constitution.
12. In my view, both s.51(ii) and s.51(xxxix) taken in conjunction
with s.61 authorize the enactment of the Refund Act. So long as the
Parliament had power under s.51(ii) to impose the tax which has been
held to be invalid by reason of contravention of s.55, then the
Parliament has power to provide that the Commissioner (or the
Commonwealth) either is entitled to retain the moneys paid as tax
under the invalid statute or is not liable to refund them. As the
Refund Act deals with the consequences arising from payment as and for
tax of a tax which was invalidly levied it is, in my opinion, a law
with respect to taxation. Because s.4(1) of the Act extinguishes the
Commonwealth's liability to repay the in situ pool tax, except as
provided by the section, its effect in that respect is to leave the
payer in the same position as if the original exaction were lawful
under the Constitution ((12) Antill Ranger (1955) 93 CLR at 99.).
The fact that, in certain circumstances, it is provided that the
Commonwealth is obliged to refund the moneys paid does not deny the
character of the law as a law with respect to taxation.
13. The Refund Act may be said to operate retrospectively by
authorizing the retention of moneys previously paid. However, it is
well settled that the Parliament may exercise its legislative powers
so as to alter or abrogate rights which would otherwise be enforced
by judicial determination ((13) Nelungaloo Pty. Ltd. v. The
Commonwealth [1947] HCA 58; (1948) 75 CLR 495 at 503-504, 579-580; Reg. v. Humby; Ex
parte Rooney [1973] HCA 63; (1973) 129 CLR 231 at 250; Australian Building
Construction Employees' and Builders Labourers' Federation v. The
Commonwealth [1986] HCA 47; (1986) 161 CLR 88 at 95-96.). It is also well settled
that, at least outside the realm of criminal law, the Parliament can
enact "a retrospective or retroactive law dealing with substantive
rights or liabilities" ((14) Polyukhovich v. The Commonwealth [1991] HCA 32; (1991)
172 CLR 501 at 534-540.).
14. Also, for the reasons given by Dixon J in Werrin, the provision
is a law with respect to a matter incidental to the execution of s.61
of the Constitution, the enforcement of taxation laws being a function
of the executive government and the receipt of payments on account of
tax being a matter incidental to that function, even when the amounts
paid are not payable to the Commissioner by reason of the invalidity
of the statute, so long as the payments were received by mistake in
good faith. Indeed, it was conceded in argument that s.51(xxxix) and
s.61 constitute a sufficient source of power to sustain the validity
of the Refund Act.
15. The Refund Act is therefore validly enacted unless it can
be demonstrated that it contravenes some other provision of the
Constitution. The plaintiff's argument that the Refund Act is
contrary to s.55 of the Constitution was abandoned in argument. The
only remaining challenge to the validity of the Refund Act is based on
s.51(xxxi) of the Constitution - that the regime established by the
Refund Act amounts to an acquisition of property otherwise than on
just terms.
Section 51(xxxi)
16. Section 51(xxxi) confers a power upon the Parliament to legislate
with respect to the acquisition of property from any State or person
on just terms for any purpose in respect of which the Parliament has
power to make laws. The provision has been described as a provision
of a fundamental character, having the status of a constitutional
guarantee, which was designed to protect citizens from being deprived
of their property except on just terms ((15) Minister of State for the
Army v. Dalziel [1944] HCA 4; (1944) 68 CLR 261 at 276 per Latham CJ, 284-285 per
Rich J; Clunies-Ross v. The Commonwealth [1984] HCA 65; (1984) 155 CLR 193 at 201-202
per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ;
Australian Tape Manufacturers Association Ltd. v. The Commonwealth
[1993] HCA 10; (1993) 176 CLR 480 at 509.).
17. The foregoing statement of the purpose and effect of s.51(xxxi)
does not reveal completely its true character and its relationship
with the other legislative powers conferred upon the Parliament by
the Constitution. The true position is, as Dixon J pointed out in
Grace Bros. Pty. Ltd. v. The Commonwealth ((16) [1946] HCA 11; (1946) 72 CLR 269 at
290-291.), that s.51(xxxi) was introduced into the Constitution as a
specific power:
"not, like the Fifth Amendment, for the purpose of
protecting the subject or citizen, but primarily to make
certain that the Commonwealth possessed a power compulsorily
to acquire property, particularly from the States. The
condition 'on just terms' was included to prevent arbitrary
exercises of the power at the expense of a State or the
subject."
18. The words "for any purpose in respect of which the Parliament
has power to make laws" are, in the context of a grant of legislative
power, words of limitation. They confine the exercise of the power
to an implementation of a purpose within the field of Commonwealth
legislative power. They are not to be read as an exclusive and
exhaustive statement of the Parliament's powers to deal with or
provide for the involuntary disposition of or transfer of title to an
interest in property.
19. The conferral of the legislative power of compulsory acquisition
subject to the requirement of just terms means that, apart from s.122
which stands in a separate position ((17) See Teori Tau v. The
Commonwealth [1969] HCA 62; (1969) 119 CLR 564 at 570.), in the absence of any
indication of contrary intention, the other legislative powers reposed
in the Parliament must be construed so that they do not authorize the
making of a law which can properly be characterized as a law with
respect to the acquisition of property for any relevant purpose
otherwise than on just terms. For it is a well-accepted principle of
interpretation that, when a power is conferred and some qualification
or restriction is attached to its exercise, other powers should be
construed, absent any indication of contrary intention, so as not to
authorize an exercise of the power free from the qualification or
restriction ((18) See Attorney-General (Cth) v. Schmidt [1961] HCA 21; (1961) 105 CLR
361 at 370-372 per Dixon CJ). Hence, the effect of s.51(xxxi) when
read in conjunction with the other legislative powers of the Parliament
is that, subject to any contrary intention, it forbids the making of
laws with respect to the acquisition of property from any State or
person for a relevant purpose on terms that are not just ((19) See
Australian Apple and Pear Marketing Board v. Tonking [1942] HCA 37; (1942) 66 CLR 77;
Johnston Fear and Kingham and The Offset Printing Co. Pty. Ltd. v. The
Commonwealth [1943] HCA 18; (1943) 67 CLR 314; Bank of N.S.W. v. The Commonwealth
("the Bank Nationalization Case") [1948] HCA 7; [1948] HCA 7; (1948) 76 CLR 1 at 349-350 per Dixon
J). Consequently, a law with respect to the acquisition of property
must comply prima facie with the requirement of just terms.
20. An indication of contrary intention may be provided by the
express terms in which a specific power is conferred or by the very
nature of the subject-matter of a specific power or what is included
within it. Thus, the very terms of s.51(xxxiii), which confers power
to make laws with respect to the acquisition of State railways "on
terms arranged between the Commonwealth and the State", indicate that
an acquisition of State railways stands outside s.51(xxxi). And, so
does s.85 which makes special provision with respect to compensation
payable by the Commonwealth for property passing from a State under
that section.
21. Likewise, a law made in the exercise of the power with respect
to bankruptcy and insolvency, which provides for the sequestration of
the property of a bankrupt and its vesting in the Official Receiver,
is not a law with respect to the acquisition of property within
s.51(xxxi) ((20) Schmidt (1961) 105 CLR at 372.). It is no more and
no less than a law which regulates the incidents and effects of
bankruptcy, the provision for the vesting of title to the bankrupt's
property in the Official Receiver being subordinate to sequestration.
That element in the law would not enable one to describe it with any
semblance of accuracy as a law for the acquisition of property. So
also with a law which provides for the forfeiture of prohibited imports
((21) Burton v. Honan [1952] HCA 30; (1952) 86 CLR 169 at 180-181.) or for
forfeiture as a consequence of conviction for a criminal offence or for
breach of some statutory provision which regulates conduct ((22)
Schmidt (1961) 105 CLR at 372.). Such a law would not be described as
a law with respect to the acquisition of property within s.51(xxxi)
simply because acquisition in the form of forfeiture of property is
prescribed as a penalty for engaging in conduct proscribed by the law,
proscription of that conduct being the primary purpose and effect of
the law. The law which provided for the application of enemy property
as war reparations was in the same category because it was a subsidiary
provision in a general scheme for the disposition of enemy property and
had to be characterized against the common law subjection of the
property of enemy aliens to seizure and forfeiture by the Crown ((23)
ibid. at 373; Trade Practices Commission v. Tooth and Co. Ltd. [1979] HCA 47; (1979)
142 CLR 397 at 456-457 per Aickin J).
22. Again, because the purpose served by an exercise of the taxation
power conferred by s.51(ii) is compulsorily to acquire money for
public purposes ((24) Commissioner of Taxation v. Clyne [1958] HCA 10; (1958) 100 CLR
246 at 263 per Dixon CJ; Trade Practices Commission v. Tooth and Co.
Ltd. (1979) 142 CLR at 453-454 per Aickin J), a law that relates to
the imposition of taxation will rarely, if ever, amount at the same
time to a law with respect to the acquisition of property within the
meaning of s.51(xxxi) ((25) But cf. Australian Tape Manufacturers
(1993) 176 CLR at 509-510 per Mason CJ, Brennan, Deane and Gaudron
JJ). Of its nature "taxation" presupposes the absence of the kind of
quid pro quo involved in the "just terms" prescribed by s.51(xxxi)
((26) ibid. at 509.). Although this conclusion virtually disposes of
the second question in the case stated, it will be convenient to
consider later the general nature of the relationship between
s.51(xxxi) and other specific legislative powers of the Parliament and
the precise meaning of the expression "acquisition of property".
23. The examples given above of instances in which a law dealing with
property or a chose in action necessarily stands apart from s.51(xxxi)
demonstrate that the words "for any purpose for which the Parliament
has power to make laws" do not support the proposition that s.51(xxxi)
applies to any law providing for acquisition of property enacted by
the Parliament. Instead, the Court has decided that acquisitions of
various kinds, even though they might perhaps fall prima facie within
the general power, are to be regarded as authorized by the exercise of
specific powers otherwise than on the basis of just terms. Of these
instances, it may be said that they are all cases in which the
transfer or vesting of title to property or the creation of a chose
in action was subservient and incidental to or consequential upon the
principal purpose and effect sought to be achieved by the law so that
the provision respecting property had no recognizable independent
character. Indeed, the taxation cases apart, they were all cases in
which the relevant statute provided a means of resolving or adjusting
competing claims, obligations or property rights of individuals as
an incident of the regulation of their relationship, e.g., the
relationship between a bankrupt and the creditors in the bankruptcy,
between the Crown and the person who brings in prohibited imports, and
between the Crown and an enemy alien with respect to enemy property.
In a context in which the law resolves or adjusts competing claims,
obligations or property rights, it is not possible to regard the law
as a law for the acquisition of property within the meaning of
s.51(xxxi). In Australian Tape Manufacturers Association Ltd. v. The
Commonwealth ((27) (1993) 176 CLR at 510.), Mason CJ, Brennan,
Deane and Gaudron JJ said:
"In a case where an obligation to make a payment is imposedThat is not to say that the constitutional provision applies only to
as genuine taxation, as a penalty for proscribed conduct,
as compensation for a wrong done or damages for an injury
inflicted, or as a genuine adjustment of the competing
rights, claims or obligations of persons in a particular
relationship or area of activity, it is unlikely that there
will be any 'acquisition of property' within s.51(xxxi) of
the Constitution."
24. Whether a law falls within s.51(xxxi) and must comply with the
requirement ultimately depends upon the characterization of the law
and upon the context of the expression "acquisition of property"
within the meaning of s.51(xxxi). In the present case, because the
Refund Act can be supported as a law that relates to the imposition
of taxation and as a law that involves the adjustment of competing
claims and obligations of individuals (namely, the pool builder and
the pool owner), it almost certainly follows that it stands outside
the constitutional conception of a law with respect to the acquisition
of property for reasons already given. However, it is necessary to
look more closely at the meaning of the words "acquisition of
property" with a view to ascertaining how the extinguishment of the
cause of action effected by the Refund Act stands in relation to that
expression.
The meaning of the expression "acquisition of property"
25. In conformity with the liberal interpretation which is given to
a legislative power subject to a safeguard such as "just terms" ((29)
Bank Nationalization Case (1948) 76 CLR at 349.), the word "property"
has a broad meaning ((30) See The Commonwealth v. New South Wales
[1923] HCA 34; (1923) 33 CLR 1 at 20-21; Dalziel (1944) 68 CLR at 285, 290; Bank
Nationalization Case (1948) 76 CLR at 349; The Commonwealth v. Tasmania
(The Tasmanian Dam Case) [1983] HCA 21; (1983) 158 CLR 1 at 145, 246-247, 282-283;
Australian Tape Manufacturers (1993) 176 CLR at 509.). Thus, a
contractual right, amounting to a chose in action, is "property" for
the purposes of s.51(xxxi) ((31) Dalziel (1944) 68 CLR at 290; Norman
v. Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 at 26; Australian
Tape Manufacturers (1993) 176 CLR at 509.), as are "innominate and
anomalous interests" ((32) Bank Nationalization Case (1948) 76 CLR at
349.). And a legislative imposition of an obligation to pay money,
depending upon the contract, may amount to an "acquisition of property"
((33) Australian Tape Manufacturers (1993) 176 CLR at 509-510.). On
the other hand, the mere extinguishment by the Commonwealth of a right
enjoyed by an owner in relation to his or her property does not amount
to an acquisition of property ((34) The Tasmanian Dam Case (1983) 158
CLR at 145.); in the absence of an acquisition of a benefit or an
interest in property, however slight or insubstantial it may be, the
complete extinguishment of contractual rights does not constitute such
an acquisition ((35) Reg. v. Ludeke; Ex parte Australian Building
Construction Employees' and Builders Labourers' Federation [1985] HCA 84; (1985) 159
CLR 636 at 653.).
26. Although the distinction between extinguishment and acquisition
of rights is clearly recognized in the law of property, it may be that
in some circumstances the extinguishment of a chose in action against
the Commonwealth would amount to an acquisition of property. The
extinguishment of such a cause of action could have the same effect as
an assignment of the chose in action to the Commonwealth. It has been
said that what the Constitution forbids directly cannot be achieved
indirectly or by means of some circuitous device ((36) Bank
Nationalization Case (1948) 76 CLR at 349-350; see also Trade Practices
Commission v. Tooth and Co. Ltd. (1979) 142 CLR at 407 per Gibbs CJ;
The Tasmanian Dam Case (1983) 158 CLR at 283 per Deane J).
27. There is some authority to suggest that the Commonwealth may
legislate to extinguish a cause of action against it without
contravening s.51(xxxi). In Werrin, Dixon J said ((37) (1938) 59 CLR
at 165.):
"There is, I think, no constitutional provision preventingAlthough Dixon J did not specifically mention s.51(xxxi), clearly
the Parliament from extinguishing a cause of action against
the Commonwealth, unless implications be discovered in
sec.75 which do so."
28. In Perpetual Executors and Trustees Association of Australia
Ltd. v. Federal Commissioner of Taxation ((40) [1948] HCA 24; (1948) 77 CLR 1.), the
Commonwealth, by certain bonds that it had issued, had promised that it
would pay interest on the bonds without deduction for any taxes. In
Magrath v. The Commonwealth ((41) [1944] HCA 14; (1944) 69 CLR 156 per Rich,
McTiernan and Williams JJ), a majority of the Court had decided that
this promise amounted to a term of the contract between the
Commonwealth and the bondholder that interest would not form part of
the assessable income of the taxpayer. Subsequent to the issue of the
bonds to the bondholder in Perpetual Executors and Trustees, the Income
Tax Assessment Act 1936 (Cth) levied income tax upon such interest.
The Court held by majority that the interest was taxable under the
statute and that the assessment and collection of the tax was not a
breach of contract. Dixon J stated that ((42) (1948) 77 CLR at 28.)
:
"the change in the law could not amount to a breach of
contract for which the Commonwealth would be liable in
damages or otherwise. A statute destroys all contracts
which stand in the way of its operation."
29. A similar conclusion had been reached in Magrath by Rich J and
Williams J, although in that case it had been unnecessary to decide
the point because the Commonwealth had stated that, if the Court found
the existence of a contract, then the Commonwealth would honour its
contractual obligations. In Magrath, Rich J observed that "(t)he
Commonwealth, by its legislature, can, without any breach of the law,
repudiate promises given by its Executive Government" ((43) (1944) 69
CLR at 170.). In neither case did the Court consider s.51(xxxi) to be
a possible bar to the validity of the imposition of the tax.
30. Perpetual Executors and Magrath support the proposition that,
where the Executive enters into a contract with a citizen, that
contract may be overridden by subsequent legislation without the need
for the provision of just terms ((44) See Rose, "The Government and
Contract", in Finn (ed.), Essays on Contract, (1987), 233 at 252-254,
where the author supports this approach in respect of contracts not
involving land or goods. See also Hogg, Liability of the Crown, 2nd
ed. (1989) at 172.). In that context, and if the
subsequent legislation is a law imposing taxation or a law with
respect to taxation which regulates competing claims and interests, no
question of acquisition of property will arise.
31. So understood, both Magrath and Perpetual Executors, as well as
Werrin, are consistent with the general proposition that a law with
respect to taxation which regulates competing claims and interests
is not a law for the acquisition of property. And here there is no
additional element in the Refund Act which would enable the Court to
say that, though it is a law with respect to taxation, it is also a
law for the acquisition of property.
32. If, contrary to the view which I take, the Refund Act can be
supported only as an exercise of the power conferred by ss.61 and
51(xxxix), it is still not possible to characterize the law as one for
the acquisition of property. Because in this case the tax has been
passed on to the pool owners, that is, the pool owners have borne the
burden of the tax, they too have an interest in the refund of the
taxes collected. Thus, notwithstanding the Commonwealth's contractual
arrangements with the pool builder, the Refund Act is in essence a
legislative measure directed to achieving a genuine resolution of the
competing claims of pool builders, pool owners and the Commonwealth
in relation to the refund of moneys in respect of the tax that was
invalidly levied. As such, for the reasons discussed above,
extinguishment of the cause of action does not constitute an
acquisition of property within the meaning of s.51(xxxi), even if the
Refund Act is to be supported by reference to ss.61 and 51(xxxix) in
relation to the whole or some of its provisions.
33. Accordingly, I would answer the questions asked as follows:
1. Yes.
2. No.
BRENNAN J The Chief Justice has exposed the issues in this case and
the circumstances from which those issues arise. For reasons with
which I respectfully agree, his Honour concludes that, s.51(xxxi)
apart, the Swimming Pools Tax Refund Act 1992 (Cth) ("the Refund Act")
finds support in s.51(ii) or in a combination of s.61 and s.51(xxxix)
of the Constitution ((45) In particular, I respectfully agree that
where a taxpayer is entitled to recover moneys exacted as a tax under a
purported but invalid law, the question whether a legislature has power
to enact a law which does no more than bar such recovery depends on
whether the legislature had power to impose the purported tax
(as in Werrin v. The Commonwealth [1938] HCA 3; (1938) 59 CLR 150) or had no
such power (as in Antill Ranger and Co. Pty. Ltd. v. Commissioner
for Motor Transport [1955] HCA 25; [1955] HCA 25; (1955) 93 CLR 83).). That conclusion leads me
immediately to a consideration of s.51(xxxi) and its guarantee of just
terms.
Can the extinguishing of a debt be an acquisition of property?
2. In Mutual Pools and Staff Pty. Ltd. v. Federal Commissioner of
Taxation ((46) [1992] HCA 4; (1992) 173 CLR 450.) this Court upheld a challenge to
the validity of the law imposing a tax on so much of a swimming pool as
is constructed in situ. It is conceded that, in consequence of that
decision, the Commonwealth was indebted to the plaintiff in the amount
which the plaintiff had paid purportedly as tax in accordance with the
impugned legislation and interest on that amount. That debt (whether
it be regarded as owing under the agreement made by the Swimming Pool
and Spa Association of Australia Ltd. and the Commissioner of Taxation
or in restitution) was not a claim created or governed by a statute.
It was a common law chose in action vested in the plaintiff and
assignable by it. The debt was "property" within the meaning of that
term in s.51(xxxi) of the Constitution.
3. By exercising its legislative power, the Commonwealth can
extinguish debts owing by it or interests outstanding against it and
thereby obtain a discharge from its liability which a subject could
obtain only by purchase or payment of the debt or by transfer or
surrender of the interest. If rights against the Commonwealth are
extinguished by statute and the rights are proprietary in nature ((47)
A question considered in Health Insurance Commission v. Peverill,
unreported, 9 March 1994.), there is an acquisition of property by the
Commonwealth. By force of s.4(1) of the Refund Act, the Commonwealth's
debt to the plaintiff was extinguished. The debt was not discharged by
payment, but the debtor - the Commonwealth - was discharged from its
liability to pay. The Commonwealth thus received a benefit precisely
corresponding with the plaintiff's loss of its property ((48) See per
Deane J in The Commonwealth v. Tasmania (the Tasmanian Dam Case)
[1983] HCA 21; (1983) 158 CLR 1 at 283.). The legislative extinction of such a debt
constitutes an acquisition of property. The more difficult question is
whether the extinction of the debt in the present case constitutes such
an acquisition of property for the purposes of s.51(xxxi): if it does,
the validity of the Refund Act depends on whether it provides just
terms for the acquisition of the debt; if it does not, the requirement
of just terms does not apply and the Refund Act is a valid exercise of
the other powers conferred by s.51(ii) or by a combination of s.61 and
s.51(xxxix) or by both.
Just terms
4. If the Refund Act must find support in s.51(xxxi), it cannot
satisfy the constitutional requirement of just terms. True it is that
the purpose of the Refund Act is to direct refunds to the pool owners
who had borne, or who are likely to have borne, the burden of the
purported but invalid tax and thus to deny a windfall benefit to the
suppliers who, though they had made the payment of the purported tax
to the Commissioner, had passed it on to the pool owners. That
consideration is relevant to the character of the Refund Act, but not
to the question whether it provides just terms. A law does not
provide just terms for the acquisition of property by the Commonwealth
from A if it provides for the payment of the price to B. Here, the
debt was owned beneficially by the plaintiff and those other suppliers
who had made the payment of the purported tax to the Commonwealth, not
by the pool owners from whom the suppliers had recouped the payments
they had made. It may be that, if a supplier received a refund, he
would be bound in restitution to refund to the owner from whom he had
previously recouped the purported tax the amount received or the
amount recouped whichever is the less. But that is a question which
does not arise for present consideration.
5. The critical question is whether the Refund Act is to be
classified as a law with respect to the acquisition of property which
must find its support in s.51(xxxi) of the Constitution.
Classification of laws providing for the taking of property
6. Section 51(xxxi) of the Constitution has a dual effect. First,
it confers power to acquire property from any State or person for
any purpose for which the Parliament has power to make laws and it
conditions the exercise of that power on the provision of just terms.
Second, by an implication required to make the condition of just terms
effective, it abstracts the power to support a law for the compulsory
acquisition of property from any other legislative power ((49)
Johnston Fear and Kingham and The Offset Printing Co. Pty. Ltd. v. The
Commonwealth [1943] HCA 18; (1943) 67 CLR 314 at 318, 325; W.H. Blakeley and Co. Pty.
Ltd. v. The Commonwealth [1953] HCA 12; (1953) 87 CLR 501 at 521; Attorney-General
(Cth) v. Schmidt [1961] HCA 21; (1961) 105 CLR 361 at 371; Trade Practices Commission
v. Tooth and Co. Ltd. [1979] HCA 47; [1979] HCA 47; (1979) 142 CLR 397 at 445.) (s.122
apart ((50) Teori Tau v. The Commonwealth [1969] HCA 62; (1969) 119 CLR 564;
Clunies-Ross v. The Commonwealth [1984] HCA 65; (1984) 155 CLR 193 at 201.) ).
Nevertheless, there are sundry laws providing for the acquisition of
property which are supported by heads of power other than s.51(xxxi)
and which are not affected by the requirement of just terms. For
example, laws providing for the imposition of a tax ((51) MacCormick
v. Federal Commissioner of Taxation [1984] HCA 20; (1984) 158 CLR 622 at 638, 649.),
the compulsory payment of provisional tax ((52) Commissioner of
Taxation v. Clyne [1958] HCA 10; (1958) 100 CLR 246 at 263, 270; Federal Commissioner
of Taxation v. Barnes [1975] HCA 61; (1975) 133 CLR 483 at 494-495, 500.), the
seizure of the property of enemy aliens ((53) Attorney-General (Cth)
v. Schmidt (1961) 105 CLR at 372-373.), the sequestration of
bankrupts' property ((54) ibid. at 372.), the forfeiture of
prohibited imports or the exaction of fines and penalties ((55) Trade
Practices Commission v. Tooth and Co. Ltd. (1979) 142 CLR at 408; Reg.
v. Smithers; Ex parte McMillan [1982] HCA 76; (1982) 152 CLR 477 at 487-489.) have
been held to be unaffected by the guarantee of just terms. If the laws
considered in these cases had been classified as laws falling within
s.51(xxxi), the acquisitions of property for which they provided would
have failed for want of the provision of just terms. Clearly there are
some laws which, though they provide for what can properly be described
as an acquisition of property, are not classified as laws falling
within s.51(xxxi). The acquisitions of property for which they provide
are not acquisitions of property for the purposes of s.51(xxxi).
7. In Australian Tape Manufacturers Association Ltd. v.
The Commonwealth, Mason CJ, Brennan, Deane and Gaudron JJ
said ((56) [1993] HCA 10; (1993) 176 CLR 480 at 510.):
"In a case where an obligation to make a payment is imposedThe question here is whether the Refund Act, though it provides for
as genuine taxation, as a penalty for proscribed conduct,
as compensation for a wrong done or damages for an injury
inflicted, or as a genuine adjustment of the competing
rights, claims or obligations of persons in a particular
relationship or area of activity, it is unlikely that there
will be any question of an 'acquisition of property' within
s.51(xxxi) of the Constitution ((57) See, generally, Attorney-General
(Cth) v. Schmidt (1961) 105 CLR at 372-373.). On the other hand,
the mere fact that what is imposed is an obligation to make
a payment or to hand over property will not suffice to
avoid s.51(xxxi)'s guarantee of 'just terms' if the direct
expropriation of the money or other property itself would
have been within the terms of the sub-section. Were it
otherwise, the guarantee of the section would be reduced to
a hollow facade."
Indicia of classification
8. A grant of legislative power comprehends a power to enact
provisions appropriate and adapted to the fulfilment of any objective
falling within the power. As Dixon CJ said in Wragg v. State of New
South Wales ((58) [1953] HCA 34; (1953) 88 CLR 353 at 386.):
"A legislative power, however, with respect to any subjectIn Burton v. Honan ((59) [1952] HCA 30; (1952) 86 CLR 169 at 177. See also British
matter contains within itself authority over whatever is
incidental to the subject matter of the power and enables
the legislature to include within laws made in pursuance
of the power provisions which can only be justified as
ancillary or incidental."
"If one thing emerges clearly from the decisions of thisI respectfully agree. Although s.51(xxxi) abstracts from other
Court it is that, to bring a law within the reach of
the incidental scope of a power, it is enough that the
provision is appropriate to effectuate the exercise of the
power; one is not confined to what is necessary for the
effective exercise of the power".
9. In each of the cases in which laws for the acquisition of property
without the provision of just terms have been held valid, such an
acquisition has been a necessary or characteristic feature of the
means selected to achieve an objective within power, the means
selected being appropriate and adapted to that end. Therefore a law
which selects and enacts means of achieving a legitimate objective is
not necessarily invalid because the means involve an acquisition of
property without just terms. What is critical to validity is whether
the means selected, involving an acquisition of property without
just terms, are appropriate and adapted to the achievement of the
objective. The absence of just terms is relevant to that question,
but not conclusive. Where the absence of just terms enhances the
appropriateness of the means selected to the achievement of the
legitimate objective, the law which prescribes those means is likely
to fall outside s.51(xxxi) and within another supporting head of
power. If it were otherwise, the guarantee of just terms would impair
by implication the Parliament's capacity to enact laws effective to
fulfil the purposes for which its several legislative powers are
conferred. It would be erroneous so to construe grants of legislative
power as to fetter their exercise by implying that s.51(xxxi)
precluded the enactment of laws under other heads of power where the
laws involved an acquisition of property without just terms, even
though laws of that kind are appropriate and adapted to the execution
of those powers in the public interest.
10. It would be erroneous to elevate the constitutional guarantee
of just terms to a level which would so fetter other legislative
powers as to reduce the capacity of the Parliament to exercise them
effectively. When the United States Supreme Court was considering
the effect of a charter granted to the proprietors of a bridge on the
capacity of the legislature to enact a law affecting the benefits of a
franchise created by the charter, the Court wrote ((61) Charles River
Bridge v. Warren Bridge [1837] USSC 2; (1837) 11 Pet 420 at 548; 36 US 341 at 431.):
"The continued existence of a government would be of noThis observation, repeated more recently ((62) Keefe v. Clark (1944)
great value, if, by implications and presumptions, it was
disarmed of the powers necessary to accomplish the ends of
its creation, and the functions it was designed to perform,
transferred to the hands of privileged corporations."
11. In my view, a law may contain a valid provision for the
acquisition of property without just terms where such an acquisition
is a necessary or characteristic feature of the means which the
law selects to achieve its objective and the means selected are
appropriate and adapted to achieving an objective within power, not
being solely or chiefly the acquisition of property. But where the
sole or dominant character of a provision is that of a law for the
acquisition of property, it must be supported by s.51(xxxi) and its
validity is then dependent on the provision of just terms.
Classification of the Swimming Pools Tax Refund Act
12. The purpose of the Refund Act, as its title indicates, is to
direct the making of refunds of the payments made as and for tax
purportedly imposed by the provisions inserted into the Sales Tax
Assessment Act (No.1) 1930 (Cth). The purported tax was of a kind
which is usually passed on to the consumer of the goods or services in
respect of which the tax is imposed. It was open to the Parliament to
provide that the purported tax collected should be refunded. It was
equally open to the Parliament to provide that the refund be made to
those who bore, or who are likely to have been the bearers of, the
burden of the amounts collected. The Parliament prescribed the manner
in which the fund of collected tax should be paid out. That fund
would not have sufficed to provide refunds to those who had borne, or
who are likely to have borne, the burden of the amount collected if
refunds also had to be made to those suppliers who had already
recouped their payments of the purported tax from pool owners. Given
that the collected tax was treated as the fund from which refunds were
to be made, the scheme necessarily involved the extinction of the
debts owing to suppliers who had recouped their payments of the
purported tax from pool owners. Thereby the fund was kept available
to those who were deemed to have the better entitlement to a refund of
the amount collected. The critical question is: was the extinction
of the debts owing to the plaintiff and other suppliers a necessary
feature of providing for the refund of moneys collected as taxes
payable under the invalid law to those who bore, or who were likely to
have borne, the burden of the amounts collected? The answer must be:
yes.
13. It follows that the extinction of the plaintiff's claim without
the provision of just terms is supportable as an exercise of power
under s.51(ii) or under the combined operation of s.61 and s.51(xxxix)
or under both but not as an exercise of power under s.51(xxxi). Thus
the guarantee of just terms is not attracted and the Refund Act is
valid.
14. I would answer the questions in the stated case:
1. Yes.
2. No.
DEANE AND GAUDRON JJ The issue between the parties to this stated
case is whether the Swimming Pools Tax Refund Act 1992 (Cth) ("the
Refund Act") is invalid in its application to the circumstances of
this case. The resolution of that issue requires consideration of the
prima facie scope of relevant Commonwealth legislative power and the
effect of the requirement of "just terms" in s.51(xxxi) of the
Constitution. The detailed facts and the relevant statutory
provisions are adequately summarized or set out in other judgments and
it is unnecessary that we repeat them.
Prima Facie Legislative Power
2. The Commonwealth relies on a number of distinct grants of
legislative power to sustain the competence of the Parliament to enact
the Refund Act. It suffices to refer to one of them, namely, the
grant of legislative power "to make laws for the peace, order, and
good government of the Commonwealth with respect to:- ... Taxation"
(Constitution, s.51(ii)).
3. As Dixon CJ, McTiernan, Webb, and Kitto JJ pointed out in
Grannall v. Marrickville Margarine Pty. Ltd. ((64) [1955] HCA 6; (1955) 93 CLR 55 at
77.), the words "with respect to" should never be neglected in
considering the extent of a legislative power conferred by s.51 of the
Constitution. All that those words require is "a relevance to or
connection with the subject assigned to the Commonwealth Parliament".
Their Honours went on to say ((65) ibid.):
"In the next place, every legislative power carries with
it authority to legislate in relation to acts, matters and
things the control of which is found necessary to effectuate
its main purpose, and thus carries with it power to make
laws governing or affecting many matters that are incidental
or ancillary to the subject matter."
4. Section 51(ii)'s grant of legislative power "with respect to"
taxation "carries with it power" to define and regulate rights of
refund of amounts paid to the Commonwealth by way of taxation in
circumstances where an amount paid was not in fact due or owing either
because the legislative provision purportedly exacting the tax was
invalid for some procedural reason, such as a failure to comply
with the requirements of s.55 of the Constitution, or because the
circumstances of the case were not such as to attract liability to pay
tax under that legislative provision ((66) See Werrin v. The
Commonwealth [1938] HCA 3; (1938) 59 CLR 150 at 163.). Subject to an important
qualification, a law regulating and defining rights of refund of
amounts unnecessarily or mistakenly paid to the Commonwealth in
discharge of asserted taxation liabilities is a law "with respect to"
taxation for the purposes of the plenary grant of power contained in
s.51(ii).
5. The qualification referred to in the preceding paragraph is that,
quite apart from the effect of s.51(xxxi), a purported law regulating
and defining rights of refund of amounts unnecessarily or mistakenly
paid by way of taxation may not be a law within s.51(ii) to the extent
that it extinguishes or modifies the right of a person to obtain a
refund of a tax which it was beyond the legislative powers of the
Commonwealth to impose. If, for example, a law purporting to impose
a tax was outside the legislative power conferred by s.51(ii) because
the imposition of the tax contravened s.92 of the Constitution, a
law which purported to extinguish all rights of recovery of amounts
exacted under the invalid law would, at least prima facie, be outside
the legislative power conferred by s.51(ii) because it also would
involve contravention of s.92 ((67) See Antill Ranger and Co. Pty.
Ltd. v. Commissioner for Motor Transport [1955] HCA 25; (1955) 93 CLR 83; affd [1956] UKPCHCA 5; (1956)
94 CLR 177; Barton v. Commissioner for Motor Transport [1957] HCA 50; (1957) 97 CLR
633 at 641, 662.). In the present case, however, the taxing
legislation was not invalid by reason of any absence of substantive
legislative power. Its character was that of a law with respect to
"taxation" and its enactment fell within the scope of the legislative
power conferred by s.51(ii). Invalidity flowed only from failure to
comply with the procedural requirements of s.55 ((68) Mutual Pools and
Staff Pty. Ltd. v. Federal Commissioner of Taxation [1992] HCA 4; [1992] HCA 4; (1992) 173 CLR
450.).
6. It is now common ground between the parties that the Refund Act
is not itself invalid on the ground that its enactment contravened the
requirements of s.55. It follows from what has been said above that,
subject to the applicability and effect of s.51(xxxi)'s requirement of
"just terms", it is a valid enactment of the Parliament pursuant to
the legislative power conferred by s.51(ii) of the Constitution. It
is, in our view, unnecessary for the Commonwealth to call in aid the
augmentation of that legislative power by s.51(xxxix) and s.61.
Section 51(xxxi)
7. Section 51(xxxi) confers upon the Parliament power to make laws
for the peace, order and good government of the Commonwealth with
respect to:-
"The acquisition of property on just terms from any State orIt is now settled that par.(xxxi)'s requirement of "just terms"
person for any purpose in respect of which the Parliament
has power to make laws".
8. Accordingly, the cases establish that, in its context in
s.51(xxxi), the word "property", which has been said to be "the most
comprehensive term that can be used" ((70) The Commonwealth v. New
South Wales [1923] HCA 34; (1923) 33 CLR 1 at 20-21 per Knox CJ and Starke J;
Australian Tape Manufacturers Association Ltd. v. The Commonwealth
(1993) 176 CLR at 509 per Mason CJ, Brennan, Deane and Gaudron JJ),
must be construed as extending "to every species of valuable right and
interest including real and personal property, incorporeal
hereditaments ... and choses in action" ((71) Minister of State for
the Army v. Dalziel (1944) 68 CLR at 290; Australian Tape Manufacturers
Association Ltd. v. The Commonwealth (1993) 176 CLR at 509.). Money
is within ordinary concepts of personal property and the acquisition of
money is an acquisition of property. Like other constitutional
guarantees, s.51(xxxi) is concerned with substance rather than form.
That being so, the imposition of an enforceable obligation to pay money
and the consequent conferral of a chose in action upon the creditor
can, depending upon the context in which the obligation is imposed,
constitute an acquisition of property by the creditor ((72) Australian
Tape Manufacturers Association Ltd. v. The Commonwealth (1993) 176 CLR
at 509-510.).
9. Similarly, the word "acquisition" is not to be pedantically or
legalistically restricted to a physical taking of title or possession.
Once it is appreciated that "property" in s.51(xxxi) extends to all
types of "innominate and anomalous interests" ((73) Bank of N.S.W. v.
The Commonwealth (1948) 76 CLR at 349 per Dixon J; see also The
Tasmanian Dam Case (1983) 158 CLR at 145, 246-247, 282-283.), it is
apparent that the meaning of the phrase "acquisition of property" is
not to be confined by reference to traditional conveyancing principles
and procedures. Nonetheless, the fact remains that s.51(xxxi) is
directed to "acquisition" as distinct from deprivation. The
extinguishment, modification or deprivation of rights in relation to
property does not of itself constitute an acquisition of property
((74) See British Medical Association v. The Commonwealth [1949] HCA 44; (1949) 79 CLR
201 at 270-271 per Dixon J; The Tasmanian Dam Case (1983) 158 CLR at
145-146 per Mason J, 181-182 per Murphy J, 247-248 per Brennan J,
283 per Deane J; Australian Tape Manufacturers Association Ltd. v. The
Commonwealth (1993) 176 CLR at 528 per Dawson and Toohey JJ It is
relevant to note that the Privy Council has also, in the context of
interpreting the Malaysian Constitution, drawn a distinction between
deprivations and acquisitions: Government of Malaysia v.
Selangor Pilot Association (1978) AC 337 at 347-348.). For there to
be an "acquisition of property", there must be an obtaining of at
least some identifiable benefit or advantage relating to the ownership
or use of property. On the other hand, it is possible to envisage
circumstances in which an extinguishment, modification or deprivation
of the proprietary rights of one person would involve an acquisition
of property by another by reason of some identifiable and measurable
countervailing benefit or advantage accruing to that other person as
a result ((75) See, generally, The Tasmanian Dam Case (1983) 158 CLR
at 283-284.). Indeed, the extinguishment of a chose in action
could, depending upon the circumstances, assume the substance of an
acquisition of the chose in action by the obligee.
10. The general statement that s.51(xxxi)'s requirement of just terms
enjoys the status of a constitutional guarantee must, of course, be
understood in the context that the requirement exists as a confining
component of the subject-matter of that paragraph's positive grant of
legislative power. That means that the requirement's direct operation
as a guarantee of just terms is necessarily confined within that grant
of power. It is in its indirect operation that the requirement of
just terms transcends the limits of par.(xxxi) and reaches into other
grants of legislative power contained in s.51. The cases establish
that the effect of par.(xxxi)'s express conferral upon the Parliament
of the power to make certain laws with respect to the acquisition
of property subject to the safeguard of just terms is that the
legislative power to make such laws without the safeguard is presumed
to be excluded or abstracted from other grants of legislative power
contained in that section. And that is so notwithstanding that,
were it not for s.51(xxxi), ordinary principles of constitutional
construction would require those other grants of legislative power to
be construed as encompassing, either directly or incidentally, the
power to make laws with respect to the acquisition of property for
the purposes to which they related ((76) See, e.g., Kohl v. United
States [1875] USSC 86; (1875) 91 US 367 at 371-372; Johnston Fear and Kingham and The
Offset Printing Co. Pty. Ltd. v. The Commonwealth [1943] HCA 18; (1943) 67 CLR 314 at
317; Attorney-General (Cth) v. Schmidt [1961] HCA 21; (1961) 105 CLR 361 at 371.).
This indirect operation of par.(xxxi)'s requirement of just terms to
reduce the content of other grants of legislative power contained in
s.51 was explained by Latham CJ in Johnston Fear and Kingham and The
Offset Printing Co. Pty. Ltd. v. The Commonwealth ((77) (1943) 67 CLR
at 317-318.):
"The paragraphs of s.51 should not, in my opinion, inAs Dixon CJ pointed out in Attorney-General (Cth) v. Schmidt ((78)
general be read as limiting each other in any way. But
there are special characteristics of par.xxxi. which raise
special questions with respect to the power to legislate for
the acquisition of property. Par.xxxi. gives express power
to legislate for the acquisition of property 'for any
purpose in respect of which the Parliament has power to make
laws.' This phrase is used in a general descriptive sense
and, in its setting, may fairly be interpreted as referring
to all other matters with respect to which the Parliament
has power to make laws and, therefore, as including the
thirty-eight subjects referred to in the other paragraphs of
s.51 ... When par.xxxi. is thus construed in relation to a
particular purpose it must, I think, be regarded as limiting
the legislative power with respect to the acquisition of
property for that purpose."
11. There are two related matters to be noted with respect to
s.51(xxxi)'s operation to confine the content of other grants of
legislative power in s.51. The first is that that operation, being
merely indirect as a matter of construction, is necessarily subject to
any contrary intention either expressed or made manifest by the words
or content of those other grants of power. In particular, some laws
which are expressly authorized under other grants of legislative power
necessarily encompass acquisition of property unrestricted by any
requirement of the quid pro quo of just terms. Laws "with respect to
... Taxation" are an example. The second is that s.51(xxxi) is, first
and foremost, a grant of power, and only secondarily a guarantee of
"just terms". For present purposes, it can be described as a power to
make laws with respect to acquisition of property on just terms. The
presence of the words "just terms" indicates that the acquisitions to
which the grant of legislative power is directed are acquisitions of a
kind which permit of just terms. There are some kinds of acquisition
which are of their nature antithetical to the notion of just terms but
which were plainly intended to be permissible under laws made pursuant
to one or more of the grants of power contained in s.51. An example
of those kinds of acquisition is the compulsory forfeiture to the
Commonwealth of money or specific property as punishment for breach
of some general rule of conduct prescribed by a valid law of the
Commonwealth. Such an acquisition stands apart from the kinds of
"acquisition of property" which constitute the subject-matter of
s.51(xxxi) and such laws are beyond the reach of the paragraph's
guarantee of just terms. Indeed, a law providing for an acquisition
of property of a kind which is inconsistent or incongruous with the
notion of just terms could validly be enacted pursuant to par.(xxxi)
itself. An example is a law providing for the payment of a pecuniary
penalty for a corrupt breach of a statutory duty imposed by a valid
law with respect to the acquisition of property on just terms.
12. It is because s.51(xxxi) operates only indirectly to confine
other powers in s.51, and, then, only within the area in which it
operates, that the following laws involving acquisition of property
without the provision of just terms have been held or indicated, in
judgments in the Court, to be supported by a grant of legislative
power other than that contained in s.51(xxxi): the imposition of a
tax ((79) Australian Tape Manufacturers Association Ltd. v. The
Commonwealth (1993) 176 CLR at 508-510.); the imposition of a
liability to pay moneys in advance of an actual taxation liability
(i.e. provisional tax) ((80) Commissioner of Taxation v. Clyne [1958] HCA 10; (1958)
100 CLR 246 at 263, 270; Federal Commissioner of Taxation v. Barnes
[1975] HCA 61; (1975) 133 CLR 483 at 494-495.); the
forfeiture of illegally imported goods in the hands of an innocent
third party ((81) Burton v. Honan [1952] HCA 30; (1952) 86 CLR 169 at 180-181. See
also Cheatley v. The Queen [1972] HCA 63; (1972) 127 CLR 291 at 307-308.); the
imposition of a pecuniary penalty by way of civil proceedings ((82)
Reg. v. Smithers; Ex parte McMillan [1982] HCA 76; (1982) 152 CLR 477 at 487-489.);
the acquisition by the Controller of Enemy Property of the property of
subjects of a former enemy to be applied to reparations payable by an
enemy State ((83) Attorney-General (Cth) v. Schmidt (1961) 105 CLR at
373, 376-377.); the vesting of a bankrupt's estate in an Official Receiver or
Trustee ((84) ibid. at 372.); and, the condemnation
of prize ((85) ibid. at
372-373.). In such cases, the law in question is either (or both) clearly
within the intended scope of another
legislative power so that it is manifest
that the rule of construction which gives s.51(xxxi) its operation as a
guarantee of just terms does not operate to deny authority to make that
law, or it is a law of a kind that does not permit of just terms in the
sense we have explained and, thus, stands outside s.51(xxxi).
13. There is another matter to be noted with respect to the area in
which s.51(xxxi) operates and, thus, confines or reduces the content
of other grants of legislative power. The requirement of "just terms"
is directed to laws with respect to the acquisition of property from
any State or person for any purpose in respect of which the Parliament
has power to make laws. The settled method for determining whether a
particular law is or is not of the kind referred to in one or other
of the grants of legislative power contained in s.51 is that of
characterization. That being so, the indirect operation of par.(xxxi)
does not extend beyond abstracting from other grants of legislative
power authority to make laws which can properly be characterized as
laws with respect to the acquisition of property for a purpose in
respect of which the Parliament has power to make laws. That does
not, of course, mean that a law will be outside the reach of
par.(xxxi) unless that is its sole or dominant character. For the
purposes of s.51, a law can have a number of characters and be, at
the one time, a law with respect to the subject-matter of a number of
different grants of legislative power. However, unless a law can be
fairly characterized, for the purposes of par.(xxxi), as a law with
respect to the acquisition of property, that paragraph cannot
indirectly operate to exclude its enactment from the prima facie scope
of another grant of legislative power. Put differently, "it is at
least clear that before the restriction involved in the words 'on just
terms' applies, there must be a law with respect to the acquisition of
property (of a State or person) for a purpose in respect of which the
Parliament has power to make laws" ((86) ibid. at 372; see also The
Tasmanian Dam Case (1983) 158 CLR at 282.).
14. The importance of the limitations on the operation of s.51(xxxi)
is magnified by the fact that the cases establish that the paragraph's
implied guarantee is not confined to acquisitions of property by the
Commonwealth and its agents. It extends to acquisitions "by any
other person" ((87) PJ Magennis Pty. Ltd. v. The Commonwealth [1949] HCA 66; (1949)
80 CLR 382 at 401-402, 411, 422-423, 429-430; and see, generally,
Jenkins v. The Commonwealth [1947] HCA 41; [1947] HCA 41; (1947) 74 CLR 400 at 406; McClintock v.
The Commonwealth [1947] HCA 39; (1947) 75 CLR 1 at 23, 36; Trade Practices
Commission v. Tooth and Co. Ltd. [1979] HCA 47; (1979) 142 CLR 397 at 407-408,
427, 451-452; Clunies-Ross v. The Commonwealth (1984) 155 CLR at
202; Australian Tape Manufacturers Association Ltd. v. The
Commonwealth (1993) 176 CLR at 510-511, 526.). Obviously, many
general laws which regulate the rights and conduct of individuals may,
for any number of legitimate legislative purposes, effect or authorize
an "acquisition of property" within the wide meaning of those words as
used in s.51(xxxi). If every such law which incidentally altered,
modified or extinguished proprietary rights or interests in a way which
constituted such an "acquisition of property" were invalid unless it
provided a quid pro quo of just terms, the legislative powers of the
Commonwealth would be reduced to an extent which could not have been
intended by those who framed and adopted the Australian Constitution.
15. As has been said, the limitations overlap. A law which is
clearly authorized under some other grant of legislative power or
which necessarily involves an acquisition of property unrestricted
by any requirement of just terms, such as a law imposing a penalty
for unlawful conduct, may well not be susceptible of independent
characterization as a law with respect to the acquisition of property.
While there is no set test or formula for determining whether a
particular law can or cannot properly be characterized for the
purposes of s.51(xxxi) as a law with respect to the acquisition of
property for a purpose in respect of which the Parliament has power to
make laws, it is possible to identify in general terms some categories
of laws which are unlikely to bear the character of a law with respect
to the acquisition of property notwithstanding the fact that an
acquisition of property may be an incident of their operation or
application. One such category consists of laws which provide for
the creation, modification, extinguishment or transfer of rights and
liabilities as an incident of, or a means for enforcing, some general
regulation of the conduct, rights and obligations of citizens in
relationships or areas which need to be regulated in the common
interest. Another category consists of laws defining and altering
rights and liabilities under a government scheme involving the
expenditure of government funds to provide social security benefits
or for other public purposes. A law falling within either of those
categories may, as an incident of its operation or enforcement,
adjust, modify or extinguish rights in a way which involves an
"acquisition of property" within the wide meaning which that phrase
bears for the purposes of s.51(xxxi). Yet, if such a law is of
general operation, it is unlikely that it will be susceptible of being
properly characterized, for the purposes of s.51 of the Constitution,
as a law with respect to the acquisition of property for a purpose in
respect of which the Parliament has power to make laws. The reason
why that is so is that, even though an "acquisition of property" may
be an incident or a consequence of the operation of such a law, it
is unlikely that it will constitute an element or aspect which is
capable of imparting to it the character of a law with respect to the
subject-matter of s.51(xxxi).
Conclusion
16. It is now common ground that, subject to the effect of the Refund
Act, the defendant Commonwealth is under a contractual obligation to
repay to the plaintiff ("Mutual Pools") the amount of $1,522 paid in
respect of Mr and Mrs Chaplin's in situ swimming pool pursuant to the
agreement between the Swimming Pool and Spa Association of Australia
Limited and the Commonwealth. In circumstances where Mutual Pools
has passed on that amount to Mr and Mrs Chaplin and has not made any
refund of it to them, the effect of the Refund Act, if it is valid,
is to extinguish Mutual Pools' contractual right against the
Commonwealth to recover that amount. It is arguable that the
extinguishment of that chose in action, to the countervailing benefit
of the Commonwealth, either itself involves the substance of an
acquisition of the chose in action by the Commonwealth ((88) But cf.
e.g. Werrin v. The Commonwealth (1938) 59 CLR at 160-161, 163,
165-168.) or converts the voluntary payment made by Mutual Pools under
the agreement into an acquisition by the Commonwealth of the amount of
the payment. It is, however, unnecessary to decide whether that is
so. Even if the extinguishment of the chose in action constituted or
retrospectively gave rise to an "acquisition of property" within the
meaning of those words as used in s.51(xxxi), the Refund Act is, both
generally and in its application to the present case, outside the
reach of the guarantee of just terms contained in that paragraph.
17. Both generally and in its application to the present case, the
Refund Act is a law defining and regulating the entitlement of persons
with possibly competing claims (i.e. builders and owners of in situ
swimming pools) to a refund of amounts paid to the Commonwealth on
account of taxes in circumstances where no tax was, in fact, payable.
Its operation is designed to ensure that any refund of amounts so paid
is made to a person who has in fact truly borne the burden of the
payment. In defining and regulating entitlement to receive such
refunds, the Refund Act necessarily affects any rights to a refund
which would have existed if it had not been enacted. In some cases,
such pre-existing rights are transformed into rights under the Refund
Act. In other cases, they are modified or extinguished, without
compensation, in favour of some competing claim, such as the claim
of a pool owner who has borne the burden of payment and received no
refund from the builder who has merely made the actual payment. In
the present case where Mr and Mrs Chaplin had borne the burden of the
tax, the Refund Act extinguished Mutual Pools' right to receive a
refund of the amount paid in respect of Mr and Mrs Chaplin's pool.
Any such modification or extinguishment of pre-existing rights without
compensation was, however, but an incident of the operation of the law
as a law defining and regulating rights of refund and does not impart
to any of the provisions of the Refund Act a distinct additional
character. It follows that, even if such an extinguishment or
modification of some pre-existing right does constitute or bring about
an "acquisition of property" within the meaning of those words as used
in s.51(xxxi), that incidental operation of the Refund Act does not
impart to all or any of its provisions the character of a law with
respect to the acquisition of property. It follows that the Refund
Act is not within the reach of the guarantee of just terms contained
in s.51(xxxi) of the Constitution.
18. There is one further matter which should be mentioned. It is
that, even if the requirement of just terms had been applicable,
it would seem to us to be arguable that Mutual Pools' suffered no
compensable or measurable detriment by reason of the operation of the
Refund Act. Such an argument would depend upon the proposition that,
if Mutual Pools had obtained a refund of the amount paid in respect
of Mr and Mrs Chaplin's pool, the principles of unjust enrichment
would have required it to pass on the amount of the refund to Mr and
Mrs Chaplin. The validity of that proposition was not, however,
examined in argument and it is unnecessary that we express any view in
relation to it.
19. The questions asked in the stated case should be answered:
1. Yes.
2. No.
DAWSON AND TOOHEY JJ In Mutual Pools and Staff Pty. Ltd. v. Federal
Commissioner of Taxation ((89) [1992] HCA 4; (1992) 173 CLR 450.) this Court held
that a tax which the defendant purported to impose upon the sale value
of swimming pools constructed in situ was in breach of s.55 of the
Constitution and of no effect. The plaintiff, who was also the
plaintiff in the previous litigation, carries on a business which
includes the construction of swimming pools in situ. It is a member of
a body called "The Swimming Pool and Spa Association of Australia Ltd."
("SPASA"), which represents the swimming pool and spa industry in
Australia. Before the question of the validity of the sales tax upon
in situ swimming pools was decided by this Court, SPASA entered into an
agreement ("the SPASA agreement") on behalf of its members with the
Commissioner of Taxation under which the members agreed to pay the tax
upon the basis that, if the relevant legislation were ultimately found
to be of no effect, all amounts paid would be repaid together with
interest at the rate specified in the Taxation (Interest on
Overpayments) Act 1983 (Cth).
2. On 12 February 1992 this Court decided that the in situ swimming
pools tax provisions were of no effect, and on 21 September 1992 the
Commonwealth Parliament enacted the Swimming Pools Tax Refund Act 1992
(Cth) ("the Refund Act"). Under that Act the Commonwealth is not
liable to make any in situ pool tax refund except as provided ((90)
Swimming Pools Tax Refund Act 1992 (Cth), s.4(1).). The tax is to be
refunded to the pool builder only to the extent that the pool builder
did not pass on the tax in the price of the pool to the pool purchaser
or to the extent that the pool builder refunded the tax to the pool
purchaser ((91) ibid., s.4(2).). If the pool builder passed on the
tax to the pool purchaser and did not refund it, then the Commonwealth
is obliged to refund the tax directly to the pool purchaser ((92)
ibid., s.4(4).).
3. The plaintiff constructed a swimming pool in situ for a Mr and
Mrs Chaplin and paid $1,522 to the Commissioner of Taxation as sales
tax on the pool. It alleges that the payment was made pursuant to the
SPASA agreement. The amount of $1,522 was passed on in whole by the
plaintiff to Mr and Mrs Chaplin and it has refunded no part of that
sum to them. The plaintiff contends that the defendant is liable to
repay to it the amount of $1,522, but the defendant says that it is
not liable to make the payment by reason of the provisions of the
Refund Act. The defendant concedes that, if the amount of $1,522 was
paid pursuant to the SPASA agreement as alleged by the plaintiff, the
defendant was legally obliged, before the Refund Act was enacted, to
repay that amount to the plaintiff. The first question reserved for
the Court by the case stated should therefore be answered yes. The
defendant argues, however, that the situation is now governed by the
Refund Act. The only question raised for the determination of the
Court is whether the Refund Act is invalid in its application to the
circumstances of this case.
4. The plaintiff contends that the Commonwealth Parliament lacked
power to pass the Refund Act. Apart from s.51(xxxi), which provides
for the acquisition of property on just terms for any purpose in
respect of which the Parliament has power to make laws, the plaintiff
argues that the defendant is unable to rely upon any other head of
legislative power. And it says that, whilst the Refund Act is a law
providing for the acquisition of property, it does not provide just
terms and the acquisition which it effects is not for any purpose in
respect of which the Parliament has power to make laws.
5. It is convenient to turn at once to s.51(xxxi) because, if it
applies, it does so to the exclusion of any other legislative power
upon which the Commonwealth might seek to rely. It has been observed
on a number of occasions that, were it not for s.51(xxxi), many of
the other legislative powers of the Commonwealth Parliament would
extend incidentally to the acquisition of property. But the presence
of s.51(xxxi), requiring, as it does, the provision of just terms,
abstracts from those other powers (including the incidental power
under s.51(xxxix) but excluding the territories power under
s.122 ((93) Teori Tau v. The Commonwealth [1969] HCA 62; (1969) 119 CLR 564.) ) the
power to legislate with respect to the acquisition of property for any
purpose in respect of which the Parliament has power to make laws and
makes s.51(xxxi) the exclusive repository of that power ((94) Johnston
Fear and Kingham and The Offset Printing Co. Pty. Ltd. v. The
Commonwealth [1943] HCA 18; (1943) 67 CLR 314 at 317-318, 325, 331; PJ Magennis Pty.
Ltd. v. The Commonwealth [1949] HCA 66; ; (1949) 80 CLR 382 at 401-403; W.H. Blakeley
and Co. Pty. Ltd. v. The Commonwealth [1953] HCA 12; (1953) 87 CLR 501 at 520-521;
Attorney-General (Cth) v. Schmidt [1961] HCA 21; (1961) 105 CLR 361 at 370-373; Trade
Practices Commission v. Tooth and Co. Ltd. [1979] HCA 47; (1979) 142 CLR 397 at 403,
445.).
6. The property which the plaintiff identifies for the purposes of
its argument concerning the application of s.51(xxxi) is its right
of action - its chose in action - against the Commonwealth under the
SPASA agreement to recover the amount of $1,522 paid by way of sales
tax on the Chaplins' pool. The Refund Act purports to extinguish that
right of action and in doing so, the plaintiff says, the Commonwealth
purports to acquire its property upon terms which are not just.
7. There can be no doubt that the plaintiff's chose in action, which
the Commonwealth concedes may have existed before the Refund Act
came into force ((95) See Precision Pools v. Federal Commissioner of
Taxation [1992] FCA 445; (1992) 109 ALR 679.), constituted property within the meaning
of s.51(xxxi) ((96) Minister of State for the Army v. Dalziel [1944] HCA 4; (1944)
68 CLR 261 at 290; Bank of N.S.W. v. The Commonwealth ("the Bank
Nationalization Case") [1948] HCA 7; [1948] HCA 7; (1948) 76 CLR 1 at 212-214, 267, 299,
349.). The question is whether the Commonwealth acquired
that property under the Refund Act by extinguishing it.
8. If one person loses property rights, it does not necessarily
follow that they are acquired by another. In The Commonwealth v.
Tasmania (The Tasmanian Dam Case) Mason J said ((97) [1983] HCA 21; (1983) 158 CLR 1
at 145.):
"The emphasis in s.51(xxxi) is not on a 'taking' ofAnd in the same case Brennan J agreed ((98) ibid. at 247.) with the
private property but on the acquisition of property for
purposes of the Commonwealth. To bring the constitutional
provision into play it is not enough that legislation
adversely affects or terminates a pre-existing right that an
owner enjoys in relation to his property; there must be an
acquisition whereby the Commonwealth or another acquires an
interest in property, however slight or insubstantial it may
be."
9. The distinction between extinguishing rights in property and
acquiring them is one that must be maintained in the application of
s.51(xxxi) ((101) Reg. v. Ludeke; Ex parte Australian Building
Construction Employees' and Builders Labourers' Federation (1985) 159
CLR at 653.). Of course, in some instances to extinguish the
rights of one person may result in the acquisition of rights by
another. For example, when a leasehold interest is extinguished the
reversioner acquires additional or increased rights. And in that
case the rights acquired are in the nature of property. The property
comprises the right to enjoy the land for the period of the lease and
is regained by the reversioner. In this case however, the property
right - the right to receive money - is not acquired by the
Commonwealth. In Bone v. Commissioner of Stamp Duties (N.S.W.) ((102)
[1974] HCA 29; (1974) 132 CLR 38 at 56.) Mason J, with the agreement of a majority,
spoke of the release of a debt owed by an executor of a will. He
said:
"What is material is that the release in equity, when itThe decision in Bone v. Commissioner of Stamp Duties (N.S.W.) was
takes effect on death, destroys or annihilates the chose in
action or, if you like, the debt. It does not vest the
chose in action in the executor or the debtor. It would be
incongruous to regard a provision for the release of a debt
as having the effect of vesting in the debtor a right to sue
himself."
10. It may perhaps be argued that for the purposes of s.51(xxxi) the
property acquired must be the same as the property divested from the
person seeking compensation. The result in this case would be that,
as the Commonwealth has not in any event acquired the plaintiff's
property, the Refund Act would not fall within s.51(xxxi). That would
be a sufficient basis to dispose of this case, and may be the basis of
decisions on other occasions refusing to recognize the extinguishment
of a chose in action as an acquisition of property ((104) McMullen v.
Commissioner for Superannuation (1985) 61 ALR 189 at 206-207; Minister
for Primary Industry and Energy v. Davey (1993) 119 ALR 108 at 119-120
per Black CJ and Gummow J, 128-129 per Burchett J; Government of
Malaysia v. Selangor Pilot Association (1978) AC 337 at 347-348;
Hewlett v. Minister for Finance (1982) 1 SA 490 at 502, 508.).
11. But even apart from an argument of that kind, the plaintiff's case
cannot succeed. The plaintiff argued that in extinguishing the debt,
the Commonwealth, in effect, acquired the plaintiff's money. But it
is essential to s.51(xxxi) that the Commonwealth acquire property.
Not every benefit which flows to another when a right is extinguished
amounts to the acquisition of property by that other. That is so
where the benefit consists only of a financial or monetary advantage.
The nature of money does not lie in its physical characteristics and
these may be disregarded. Money is a medium of exchange; it is not an
object of exchange ((105) Mann, The Legal Aspect of Money, 5th ed.
(1992) at 24; Fama, "Banking in the theory of finance", (1980) 6
Journal of Monetary Economics 39 at 42.). It represents value, or
purchasing power, in units of account ((106) See Mill, "Of Money", in
Principles of Political Economy, 7th ed. (1871), Bk 3, Ch 7; Friedman,
"Money" in Encyclopaedia Britannica, 15th ed., vol.24 at 333.).
12. The reality of the distinction between the acquisition of value
and the acquisition of property is well illustrated by the following
example ((107) Mann, "Outlines of a History of Expropriation", (1959)
75 Law Quarterly Review 188 at 214.):
"From the purely economic point of view there may, at
first sight, be little practical distinction between the
case, on the one hand, in which a statute imposes, for
instance, upon patentees the duty to pay to the State
one-half of the profits made as a result of the exploitation
of the patent, and the case, on the other hand, in which
patentees are required by statute to transfer to the State a
half share in the patents. Yet the distinction is a real
one. In the first case a patentee has the right to pay the
tax out of his general resources, and is not required to
part with the patent or a share in it. In the second case
he has no option but to give up a share in the patent as
such and, therefore, loses specific property which he can no
longer use and exploit at his discretion and for which he is
expected to be compensated".
13. The distinction between the transfer of value and the acquisition
of property is well established ((108) See Ilich v. The Queen [1987] HCA 1; (1987)
162 CLR 110 at 128-129.) and is not dependent upon considerations of a
constitutional nature ((109) See, e.g., Ricket v. Metropolitan Railway
Co. (1867) LR 2 HL 175 at 194-195, 198; S.JC Construction Co. Ltd. v.
Sutton London Borough Council (1975) 29 P and CR 322 at 325-326.). It
is a distinction which was assumed by those responsible for the
drafting of s.51(xxxi). Clearly, when that paragraph was added to the
draft of the Constitution, what was envisaged was the acquisition of
physical property, in particular land, and not the transfer of value
((110) Official Report of the National Australian Convention Debates,
Adelaide, 22 April 1897, at 1199; Official Record of the Debates of the
Australasian Federal Convention, Melbourne, 25 January 1898, at
151-154; 4 March 1898, at 1874; see also Quick and Garran, The
Annotated Constitution of the Australian Commonwealth, (1901) at
640-642.).
14. Value cannot constitute property within the meaning of s.51(xxxi)
because the phrase "acquisition of property on just terms" presupposes
that the property acquired can be valued, whatever else the expression
may entail, and it is meaningless to speak of the value of value.
As will be seen, it is for this reason, amongst others, that taxation
- the compulsory exaction of money as opposed to the acquisition of a
specific debt or chose in action - does not involve the acquisition of
property within the meaning of s.51(xxxi).
15. Neither the creation nor the satisfaction of a chose in action,
at least in the form of a debt, involves the acquisition of property.
As we said in Australian Tape Manufacturers Association Ltd. v. The
Commonwealth concerning the creation of a debt which is met by the
payment of money ((111) [1993] HCA 10; (1993) 176 CLR 480 at 527.):
"The debt itself is a chose in action the creation of whichWe relied upon what was said by Aickin J in Trade Practices
does not involve the acquisition of property from any
person. Nor does the discharge of the liability by the
payment of money, which is not transferred in specie but as
a medium of exchange, involve the acquisition of property in
any relevant sense."
"Taxation involves the compulsory payment of money toAnd in MacCormick v. Federal Commissioner of Taxation the majority
the Commonwealth according to prescribed criteria applicable
to persons who fall within the specified categories in a
manner capable of testing in the courts. Its imposition
creates a debt but does not compulsorily acquire property.
No doubt when payment is made property in the cas(h) or
cheque passes to the Commonwealth but it is not a process
capable of being categorized or described as 'acquisition of
property', save in a very unusual sense of that expression."
"It was suggested, albeit faintly, that the exaction mayAgain, that observation was not dependent upon the fact that the
amount to an acquisition of property within the meaning
of s.51(xxxi) of the Constitution so as to import the
requirement of just terms. But, if it is in truth a tax,
its very nature prevents it amounting to an acquisition of
property. It is no more than the imposition of a pecuniary
liability".
16. Taxation must lie outside the ambit of s.51(xxxi). If the
imposition of a tax were an acquisition of property requiring just
terms, it would defeat the very purpose of the taxation power ((116)
s.51(ii).) which is to raise money for public purposes ((117)
Commissioner of Taxation v. Clyne [1958] HCA 10; (1958) 100 CLR 246 at 263.). To
treat the exaction of money as the acquisition of property and to
require just terms would require the money to be repaid at the same
time as it was exacted and clearly that cannot have been an intended
result of s.51(xxxi), having regard to the express power to make laws
with respect to taxation in s.51(ii). If taxation lies outside the
ambit of s.51(xxxi), it is crucial to distinguish between taxation and
the acquisition of property. The distinction is between the
acquisition of money or value, which is a tax, and the acquisition of
specific property, which is not ((118) See the illustration already
cited from Mann, (1959), op.cit.).
17. Protection against misuse of the taxation power lies elsewhere
and it is to be found in the requirements that a tax be neither a
penalty nor arbitrary nor incontestable ((119) MacCormick v. Federal
Commissioner of Taxation (1984) 158 CLR at 639-644.). Nevertheless,
the ambit of the taxation power is reduced in some respects by
s.51(xxxi). The taxation power standing by itself ((120) The incidental
power in s.51(xxxix) would not be relevant: see Le Mesurier v. Connor
(1929) 42 CLR 481 at 497-498.) would carry with it the incidental
power to legislate for the acquisition of property for taxation
purposes - for example, to acquire a building for use as a taxation
office. But s.51(xxxi), and not s.51(ii), is the source of the power
to acquire property in those circumstances and just terms must be
provided ((121) cf. Attorney-General (Cth) v. Schmidt (1961) 105 CLR at
372.).
18. In arriving at the meaning of the phrase "acquisition of property"
in s.51(xxxi), it is necessary to have regard to the composite
expression of which it forms part, namely, "acquisition of property
... for any purpose in respect of which the Parliament has power to
make laws". As Dixon CJ pointed out in Attorney-General (Cth) v.
Schmidt ((122) ibid.), "it refers to the use or application of the
property in or towards carrying out or furthering a purpose comprised
in some other legislative power". Whilst the precise limits of that
expression have proved elusive ((123) Trade Practices Commission v.
Tooth and Co. Ltd. (1979) 142 CLR at 408 per Gibbs J), it does appear
primarily to refer to the acquisition of real or personal property
which itself is intended to be used by the government in administering
laws made by the Parliament in the exercise of its legislative power
((124) Attorney-General (Cth) v. Schmidt (1961) 105 CLR at 372 per
Dixon CJ; Re Tooth and Co. Ltd. (No.2) [1978] FCA 36; (1978) 34 FLR 112 at 146-147.). Clearly
this was the original intention lying behind
s.51(xxxi) ((125) Grace Brothers Pty. Ltd. v. The Commonwealth [1946] HCA 11; (1946)
72 CLR 269 at 290-291 per Dixon J). The terms of the section
certainly do not describe the raising of moneys for public purposes,
which is predominantly the function of the taxation power.
19. The view that s.51(xxxi) is primarily concerned with the
acquisition of property for use or application by the executive
government was said by Murphy J in Trade Practices Commission v.
Tooth and Co. Ltd. ((126) (1979) 142 CLR at 434.) to have much force.
But it cannot be taken too far, for it is now settled that s.51(xxxi)
applies where Commonwealth legislation provides for the acquisition of
property by some person other than the Commonwealth or an agency of the
Commonwealth ((127) Jenkins v. The Commonwealth [1947] HCA 41; (1947) 74 CLR 400 at
406; McClintock v. The Commonwealth [1947] HCA 39; (1947) 75 CLR 1 at 23, 36; PJ
Magennis Pty. Ltd. v. The Commonwealth (1949) 80 CLR at 401-402, 411,
423; Trade Practices Commission v. Tooth and Co. Ltd. (1979) 142
CLR at 427, 451-452; Australian Tape Manufacturers Association
Ltd. v. The Commonwealth (1993) 176 CLR at 510-511, 526.). As
Aickin J observed in Trade Practices Commission v. Tooth and Co.
Ltd. ((128) (1979) 142 CLR at 452.):
"It would be a serious gap in the constitutional safeguardHowever, compulsory acquisition by a third person is not within the
which is the manifest policy of par.(xxxi) if the Parliament
could legislate for compulsory acquisition of property
without just terms by statutory bodies which were not the
Commonwealth itself or its agents or by persons or bodies
having no connexion with the government. Neither the words
of s.51 nor the context require the adoption of so anomalous
a view."
20. The restriction of s.51(xxxi) to laws with respect to the
acquisition of property for any purpose in respect of which the
Parliament has power to make laws explains why the confiscation or
forfeiture of property, as in the case of prohibited imports, is
not an acquisition of property, at all events within the meaning of
s.51(xxxi), even though it involves the passing of property. Merely
as a matter of nomenclature, forfeiture or confiscation is something
different from acquisition. In addition, as Dixon CJ said in Burton
v. Honan ((129) [1952] HCA 30; (1952) 86 CLR 169 at 180-181.) in relation to a
forfeiture:
"the whole matter lies outside the power given by
s.51(xxxi). It is not an acquisition of property for any
purpose in respect of which Parliament has power to make
laws. It is nothing but forfeiture imposed on all persons
in derogation of any rights such persons might otherwise
have in relation to the goods, a forfeiture imposed as part
of the incidental power for the purpose of vindicating the
Customs laws. It has no more to do with the acquisition of
property for a purpose in respect of which the Parliament
has power to make laws within s.51(xxxi) than has the
imposition of taxation itself".
21. Although the property in forfeited goods passes to the
Commonwealth, it does not acquire the goods for any purpose for which
the Parliament has power to make laws. The goods are not acquired
with the object of putting them to any use or application falling
within a head of legislative power ((130) Query whether the acquisition
of property of enemy aliens falls outside s.51(xxxi) for this reason,
but cf. Attorney-General (Cth) v. Schmidt [1961] HCA 21; ; (1961) 105 CLR 361.). The
purpose of the acquisition is complete at the moment of acquisition.
The acquisition is by way of penalty, but the imposition of a penalty
is not a purpose in respect of which the Parliament has power to make
laws, however much it may be an incident of purposes in respect of
which the Parliament does have power to make laws. Of course, a
penalty which is not an incident of such a purpose would lie outside
Commonwealth power.
22. It is true that no narrow view is to be taken of what constitutes
"property" for the purposes of s.51(xxxi) ((131) Minister of State for
the Army v. Dalziel (1944) 68 CLR at 276, 285, 290, 295.). As Dixon
J said in the Bank Nationalization Case ((132) (1948) 76 CLR at 349.)
:
"I take Minister of State for the Army v. Dalziel ((133) [1944] HCA 4; (1944)Nevertheless, it is with the compulsory acquisition of property
68 CLR 261.) to mean that s.51(xxxi) is not to be confined
pedantically to the taking of title by the Commonwealth to some
specific estate or interest in land recognized at law or in
equity and to some specific form of property in a chattel or
chose in action similarly recognized, but that it extends to
innominate and anomalous interests and includes the
assumption and indefinite continuance of exclusive
possession and control for the purposes of the Commonwealth
of any subject of property. Section 51(xxxi) serves a
double purpose. It provides the Commonwealth Parliament
with a legislative power of acquiring property: at the
same time as a condition upon the exercise of the power it
provides the individual or the State ... affected with a
protection against governmental interferences with his
proprietary rights without just recompense."
23. Murphy J did not think that s.51(xxxi) encompassed laws for the
acquisition of property by third parties ((134) The Tasmanian Dam Case
(1983) 158 CLR at 181-182.), but the note of caution which he sounded
in Trade Practices Commission v. Tooth and Co. Ltd. ((135) (1979) 142
CLR at 434.), in observing that many federal laws provide for the
alteration of rights and obligations between citizens, serves to
emphasize that giving the word "property" in s.51(xxxi) an extended or
notional meaning would be likely to produce some remarkable and
unexpected results. Murphy J instanced the invalidity of
long-standing sections of the Conciliation and Arbitration Act 1904
(Cth) and it is not difficult to think of other examples ((136) e.g.,
the legislation altering contractual rights in Peacock v. Newtown
Marrickville and General Co-operative Building Society No.4 Ltd. [1943] HCA 13; (1943)
67 CLR 25 and prohibition legislation instanced in Hewlett v. Minister
for Finance (1982) 1 SA at 502.).
24. In Australian Tape Manufacturers Association Ltd. v. The
Commonwealth ((137) (1993) 176 CLR at 509.), in a passage which was
"strictly unnecessary" to their judgment, the majority expressed the
following view:
"In the context of s.51(xxxi), the word 'property' must alsoThere can, of course, be no question that a right to receive money - a
be construed as extending to money and the right to receive
a payment of money. If it were otherwise, money or the
right to receive money could compulsorily be acquired for
any purpose in respect of which the Parliament has power to
make laws and without compensation, provided the money or
the right to receive it was not revenue raised by taxation,
a proviso which might be satisfied whenever the relevant
purpose was to confer a private and direct benefit on a
person or group. The guarantee which s.51(xxxi) was
intended to give in protection of property would then
largely be illusory."
25. It was also suggested by the majority in Australian Tape
Manufacturers Association Ltd. v. The Commonwealth ((139) (1993) 176
CLR at 509-510.) that if:
"a law did no more than provide that a particular namedBut an exaction calculated as a percentage of a person's assets is no
person was under an obligation to pay to the Commonwealth an
amount of money equal to the total value of all his or her
property, the law would effect an acquisition of property
for the purposes of s.51(xxxi), notwithstanding the fact
that it imposed merely an obligation to pay money and did
not directly expropriate specific notes or coins."
26. In the United States the Fifth Amendment prohibits the taking
of private property for public use without just compensation. The
prohibition is extended to the States by means of the due process
clause in the Fourteenth Amendment. There are, of course, important
differences between a prohibition against taking property and a
provision which confers legislative power to acquire property
compulsorily. For that reason, and because the prohibition in the
United States is associated with due process, the American cases upon
the subject have a limited application in this country ((142) Minister
of State for the Army v. Dalziel (1944) 68 CLR at 294- 295; Grace
Brothers Pty. Ltd. v. The Commonwealth (1946) 72 CLR at 289-290; The
Tasmanian Dam Case (1983) 158 CLR at 144-145; and see also Government
of Malaysia v. Selangor Pilot Association (1978) AC 337 at 347-348.
Similarly, the distinction between "deprivation" and "acquisition" of
property means that the remarks of the Privy Council in Societe United
Docks v. Government of Mauritius (1985) AC 585 are not relevant
to the interpretation of s.51(xxxi).). The
United States cases dealing with the indirect taking of property by
state regulation have interpreted broadly the concepts of property and
of taking. The history of that interpretation is traced in Lucas v.
South Carolina Coastal Council ((143) [1992] USSC 111; (1992) 120 L Ed 2d 798; see also
Trade Practices Commission v. Tooth and Co. Ltd. (1979) 142 CLR at
414-415 per Stephen J; The Tasmanian Dam Case (1983) 158 CLR at
144-145 per Mason J, 284 per Deane J). In Lucas ((144) (1992) 120 L
Ed at 813, citing Agins v. Tiburon [1980] USSC 111; (1980) 447 US 255 at 260.) the
Supreme Court of the United States affirmed that "the Fifth Amendment
is violated when land use regulation 'does not substantially advance
legitimate state interests or denies an owner economically viable use
of his land'" ((145) Emphasis added in Lucas v. South Carolina Coastal
Council.). It is suggested that the justification for the rule is,
perhaps, "that total deprivation of beneficial use is, from the
landowner's point of view, the equivalent of a physical appropriation"
((146) (1992) 120 L Ed at 814.). Whilst that may amount to a taking
from a landowner's point of view, even regulation which leaves
property economically idle does not of itself amount to the acquisition
of the property by anyone and it is upon acquisition that s.51(xxxi)
of the Australian Constitution places emphasis. However, where the
regulation amounts to the use of the property by the Commonwealth, the
view is open that it constitutes an acquisition ((147) See The
Tasmanian Dam Case (1983) 158 CLR at 286-287 per Deane J; but cf.
Minister for Primary Industry and Energy v. Davey (1993) 119 ALR 108.).
27. The American cases have, however, recognized a distinction between
the taking of property and of value. In Penn Central Transportation
Co. v. New York City ((148) [1978] USSC 180; (1978) 438 US 104 at 124-125; approved in
Lucas v. South Carolina Coastal Council (1992) 120 L Ed 2d at 814; and
see British Medical Association v. The Commonwealth [1949] HCA 44; (1949) 79 CLR
201 at 270.) Brennan J speaking for the Court said:
"'Government could hardly go on if to some extent values
incident to property could not be diminished without paying
for every such change in the general law,' ((149) Pennsylvania
Coal Co. v. Mahon [1922] USSC 193; (1922) 260 US 393 at 413.) and this Court has
accordingly recognized, in a wide variety of contexts, that
government may execute laws or programs that adversely affect
recognized economic values. Exercises of the taxing power are one
obvious example. A second are the decisions in which this Court
has dismissed 'taking' challenges on the ground that, while the
challenged government action caused economic harm, it did not
interfere with interests that were sufficiently bound up with the
reasonable expectations of the claimant to constitute
'property' for Fifth Amendment purposes."
28. It follows from what we have said that we do not regard the Refund
Act as effecting an acquisition of property by the Commonwealth or
anyone else. No doubt the right of action on the part of the
plaintiff to recover from the Commonwealth the amount paid by way
of sales tax upon the Chaplins' pool is extinguished. But that has
not resulted in any acquisition of property by the Commonwealth, even
if the Commonwealth has acquired a financial advantage or benefit
(although the Commonwealth is obliged to refund moneys under the
Refund Act). Indeed, it may be argued that s.51(xxxi) has never been
thought to prevent the Commonwealth from extinguishing a right of
action against it. In Werrin v. The Commonwealth, in which the effect
of s.51(xxxi) was considered ((150) [1938] HCA 3; (1938) 59 CLR 150 at 163 per Starke
J), Dixon J observed ((151) ibid. at 165.):
"There is, I think, no constitutional provision
preventing the Parliament from extinguishing a cause of
action against the Commonwealth, unless implications be
discovered in s.75 which do so."
29. If the Refund Act is a valid enactment it must, therefore, be
supported by a legislative power other than s.51(xxxi). In our view,
that power is to be found either in s.51(ii), the taxation power, or
in s.61, the executive power, coupled with the incidental power,
s.51(xxxix). Either would, we think, suffice.
30. In Werrin v. The Commonwealth the Court considered the validity
of s.12A of the Sales Tax Procedure Act 1934 (Cth) which provided that
no one should be entitled to a refund of payments made as sales tax
on the ground that the goods had gone into use or consumption in
Australia before the transaction by reason of which the sales tax
payments were made, if the payments were made before a certain date.
That provision was enacted following the decision in Deputy Federal
Commissioner of Taxation (S.A.) v. Ellis and Clark Ltd. ((152) (1934)
[1934] HCA 54; 52 CLR 85.) that sales tax was not payable on second hand goods, that
is to say, goods that had gone into use and consumption in Australia.
Latham CJ found it unnecessary to consider the validity of s.12A, but
Rich J expressed the view ((153) (1938) 59 CLR at 161.):
"As to the validity of the section, I should have thought itStarke J said ((154) ibid. at 163.):
was clearly within the competence of the Federal Parliament
to say that a sum of money erroneously collected under a tax
Act by administrative officers acting in good faith should
be retained."
"But the provision, if not a tax, is, in my judgment,Dixon J expressed the alternative view ((155) ibid. at 165.):
clearly a law with respect to taxation and within the
competence of Parliament."
"I think that s.12A is clearly a law with respect to a
matter incidental to the execution of a power vested by the
Constitution in the government of the Commonwealth within
the meaning of s.51(xxxix) of the Constitution. For the
enforcement of the taxation laws, as of other laws, is the
function of the government under s.61 and it is a matter
incidental to that function or power to receive payments on
account of tax including sums which, through some mistake of
fact or law, are collected although not strictly payable."
31. It was argued that the levy in this case was deprived of its
character as a tax because it was not exacted by a valid law. But
money collected under an invalid law is still a "compulsory exaction
of money" ((156) See Matthews v. Chicory Marketing Board (Vict.) [1938] HCA 38; (1938)
60 CLR 263 at 276.). It may be a tax invalidly collected, but it is
nevertheless a tax. A subsequent law for its refund is thus a law
with respect to taxation.
32. In our view the reasoning in Werrin v. The Commonwealth is
applicable to this case. The Refund Act may not itself impose a tax
but it is a law with respect to taxation because it provides a method
of refunding a tax wrongly collected under a law which purported to
impose the tax but which was of no effect because it failed to comply
with s.55 of the Constitution. It must, we think, be incidental to
the taxation power to provide for the retention or disposal of moneys
collected as taxes but which, through a failure to comply with the
requirements of a provision such as s.55, cannot be regarded as having
been validly exacted. On the other hand, if the collection of the
moneys under the SPASA agreement be regarded as an executive action,
it must be within the express incidental power to provide for the
manner in which the moneys are to be dealt with when it appears that
there was no legislative support for their collection.
33. We should add that it was not argued that the payment of the
money to the Commonwealth pursuant to the SPASA agreement was not
voluntary. Nor was it submitted that the Commonwealth's refusal
to repay the money except according to the Refund Act was in breach
of any constitutional protection save for that to be found in
s.51(xxxi) ((157) cf. Mason v. New South Wales [1959] HCA 5; (1959) 102 CLR 108.).
In particular, it was not argued that the Refund Act is a law imposing
taxation or that, if it is, it is in breach of s.55 of the
Constitution. An argument that the Refund Act is in breach of s.55 by
trying to do indirectly what could not be done directly was expressly
withdrawn ((158) cf. Antill Ranger and Co. Pty. Ltd. v. Commissioner
for Motor Transport [1955] HCA 25; (1955) 93 CLR 83, affd [1956] UKPCHCA 5; (1956) 94 CLR 177; Barton
v. Commissioner for Motor Transport [1957] HCA 50; (1957) 97 CLR 633.).
34. For these reasons, we would answer yes to the first question in
the case stated and no to the second question.
McHUGH J This case stated arises out of a suit which the plaintiff
has commenced in this Court for a declaration that the Swimming Pools
Tax Refund Act 1992 (Cth) ("the Refund Act") is invalid. The genesis
of the enactment of the Refund Act was the decision of the Court
in Mutual Pools and Staff Pty. Ltd. v. Federal Commissioner of
Taxation ((159) [1992] HCA 4; (1992) 173 CLR 450.) which held that the Sales Tax
Laws Amendment Act 1986 (Cth) ("the Amending Act") was invalid by
reason of its failure to comply with the provisions of s.55 of the
Constitution. Section 55 provides:
"Laws imposing taxation shall deal only with the
imposition of taxation, and any provision therein dealing
with any other matter shall be of no effect.
Laws imposing taxation, except laws imposing duties
of customs or of excise, shall deal with one subject of
taxation only; but laws imposing duties of customs shall
deal with duties of customs only, and laws imposing duties
of excise shall deal with duties of excise only."
2. The Amending Act purported to amend the Sales Tax Assessment Act
(No.1) 1930 (Cth) by deeming swimming pools constructed in situ to be
manufactured goods and consequently subject to sales tax. Although
the substantive provisions of the Amending Act were within the power
conferred by s.51(ii) of the Constitution, the Court held that the
Amending Act was invalid because it purported to amend the Sales Tax
Assessment Act (No.1) in a way which would have meant that that
legislation, which deals with duties of excise, would have dealt with
something other than a duty of excise, contrary to s.55.
3. Prior to the decision of the Court in Mutual, the Commissioner of
Taxation on behalf of the Commonwealth entered into an agreement with
the Swimming Pool and Spa Association of Australia Ltd. ("SPASA")
which provided that, pending the judgment of this Court in Mutual and
in consideration of members of SPASA paying the sales tax purportedly
imposed in respect of in situ swimming pools, such payments together
with interest would be refunded to the members of SPASA in the event
that the Court held that the Amending Act was invalid. After the
making of that agreement, the plaintiff, a builder of swimming pools
and a member of SPASA, paid sales tax in the sum of $1,522 to the
Commissioner in respect of the construction of an in situ swimming
pool. The plaintiff passed on the whole of the tax to the purchasers
of the pool.
4. The effect of the Refund Act is to extinguish any liability on the
part of the Commonwealth "to make any in situ pool tax refund payment"
as the result of the invalidity of the Amendment Act except in
accordance with s.4 of the Refund Act, the principal parts of which
provide:
"4.(1) Except as provided by this section, theOther parts of s.4 provide for the repayment of the whole or part of
Commonwealth is not liable to make any in situ pool tax
refund payment.
(2) If, before the commencement of this Act or within
2 years after its commencement, the pool builder in respect
of an in situ pool tax payment has made a declaration to the
Commissioner, in a form approved by the Commissioner for the
purpose, of either or both of the following kinds:
(a) that a specified amount, being the whole or part
of the in situ pool tax concerned, was not passed
on to the pool purchaser in relation to the
swimming pool concerned;
(b) that a specified amount, being the whole or part
of any of the in situ pool tax concerned that was
passed on to the pool purchaser in relation to the
swimming pool concerned, has been refunded to the
pool purchaser;
then the Commonwealth is only liable to make the in situ
pool tax refund payment to the pool builder to the extent
that it equals the sum of:
(c) the amount of the tax that was not passed on; and
(d) the amount of the tax that was refunded.
..."
5. Although the Commonwealth concedes that, prior to the passing
of the Refund Act, it was liable to repay the sum of $1,522
unconditionally to the plaintiff, it contends that it is now liable in
respect of that sum only in the manner and to the extent prescribed by
the Refund Act. In response, the plaintiff contends that the Refund
Act is invalid because there is no constitutional head of power which
would support the legislation and that, if there is, the legislation
is invalid because it purports to acquire the plaintiff's property
otherwise than on just terms, contrary to s.51(xxxi) of the
Constitution.
The case stated asks two questions:
"1 If the said amount of $1,522 was paid pursuant to
the SPASA agreement, was the (Commonwealth) legally
obliged, before the Refund Act was enacted, to repay
the said amount to the plaintiff ...
2 Is the Refund Act invalid in its application to the
circumstances of this case?"
The validity of the agreement with SPASA
6. The Commonwealth rightly conceded that the agreement entered into
on its behalf between the Commissioner of Taxation and SPASA was a
valid agreement and that, absent the provisions of the Refund Act, the
Commonwealth was legally liable to repay sales tax paid in accordance
with that agreement. Under the Westminster system, the executive
government of a polity has implied power to make any agreement on
behalf of that polity which is reasonably necessary for the
administration of the business of government of the polity ((160)
O'Keefe v. Williams [1907] HCA 64; (1907) 5 CLR 217.). The speedy collection of
taxes, imposed by legislative enactment, is one of the most important
duties of an executive government. When doubt arises as to the
entitlement of the government to collect a tax, an agreement enabling
the government to obtain the immediate benefit of the tax furthers the
object of the revenue statute and the administration of government,
even if the agreement provides that the government will refund any
excess payment when the liability of the taxpayer is determined. In
Queensland Trustees Ltd. v. Fowles ((161) [1910] HCA 51; [1910] HCA 51; (1910) 12 CLR 111.), this
Court held that the Chief Commissioner of Stamps, acting for and on
behalf of the government of Queensland, had power to enter into an
agreement to repay excess succession duty if the value of an estate
turned out to be less than the value assessed for the purpose of an
interim assessment of duty.
7. The agreement entered into between the Commissioner on behalf of
the Commonwealth and SPASA in this case was within the executive power
of the Commonwealth because it enabled the Commonwealth to receive
moneys which might otherwise have been withheld and because it avoided
the possibility of lengthy and expensive enforcement proceedings. The
first question in the case stated must be answered in the affirmative.
Indeed, the Commonwealth conceded that this was so.
The Refund Act is a valid enactment
8. In my opinion, the Refund Act is a valid enactment. It is
convenient to summarise my reasons for this conclusion before I set
out the detail of those reasons. The substantive powers conferred by
ss.51 and 61 of the Constitution together with the incidental power
conferred by s.51(xxxix) extend to the making of laws which bar
remedies otherwise available in respect of the unlawful receipt of
moneys or the carrying out of tortious actions by or on behalf of the
Commonwealth. While those powers do not extend to making laws which
bar remedies in respect of the exaction of moneys or the carrying out
of tortious activity in respect of matters over which the Commonwealth
has no power to pass laws, nevertheless federal Parliament can bar
remedies in respect of such exactions or activities whenever it could
retrospectively validate the conduct in question. However, if the
exaction of money constitutes or constituted an acquisition of
property within the meaning of s.51(xxxi), federal Parliament can
only bar remedies for the recovery of the property if the barring
legislation provides "just terms" for the retention of property.
9. In this case, the Amending Act was invalid only because it failed
to comply with s.55 of the Constitution. If it wished, federal
Parliament could have re-enacted the substance of the Amending Act and
given it a retrospective operation. While Parliament has chosen to
repay the moneys unlawfully collected to those who really paid the tax
instead of retrospectively validating the collection of the tax, the
Refund Act is still a law with respect to taxation within the meaning
of s.51(ii) of the Constitution. Furthermore, neither the Amending
Act nor the Refund Act involved or involves an "acquisition" of
property within the meaning of s.51(xxxi) of the Constitution.
Accordingly, in my opinion, the Refund Act is a valid enactment.
Barring remedies for unlawful conduct
(i) Section 51 and the incidental power
10. The powers conferred by s.51, when read with the incidental power
(s.51(xxxix)), are sufficiently comprehensive to enable the Parliament
of the Commonwealth to enact laws retrospectively validating the
legality of conduct falling within a head of power conferred by s.51.
The power of the Parliament to pass retrospective criminal legislation
is beyond doubt ((162) Polyukhovich v. The Commonwealth [1991] HCA 32; (1991) 172 CLR
501.). Similarly, the federal Parliament can retrospectively validate
unlawful conduct either absolutely or conditionally if that conduct is
a matter falling within a federal head of power ((163) Talga Ltd. v.
MBC International Ltd. [1976] HCA 22; (1976) 133 CLR 622.). It must follow that the
federal Parliament can legislate to prevent the bringing of an action
in respect of that conduct, whether or not it decides to validate the
conduct in question. The power to validate the legality of conduct
must carry with it the power to prevent any action being brought in
respect of that conduct.
(ii) Section 61 and the incidental power
11. The combination of s.61 and the incidental power is another source
of power for validating unlawful executive activity or for barring
actions in respect of such activity. That combination is sufficiently
comprehensive to enable the federal Parliament to prevent the bringing
of an action against the executive government in respect of an act
done in good faith on behalf of the Commonwealth which, although not
authorised by statute, was reasonably related to a power vested in the
executive government. Thus, subject to the Constitution, s.51(ii)
confers power on the Parliament of the Commonwealth to make laws with
respect to taxation. Collecting moneys paid in discharge of taxation
liabilities, imposed by a federal statute, is a function of the
executive government of the Commonwealth. It is part of the executive
power of the Commonwealth within the meaning of s.61 of the
Constitution and can properly be regarded as "incidental to the
execution of (a) power vested by this Constitution in the Parliament
... or in the Government of the Commonwealth" within the meaning of
s.51(xxxix) of the Constitution even if the assessment imposing the
tax is unlawful. If the action of the executive government was
carried out in good faith and could reasonably be referred to such
a power, it can fairly be regarded as incidental to that power.
In s.51(xxxix), matters incidental to the execution of the powers
specified in that paragraph should not be construed as encompassing
only intra vires actions. Mistaken, but honest and reasonable,
actions taken to execute and maintain a valid law of the Commonwealth
can be regarded as incidental to the execution of a power vested by
the Constitution in the government of the Commonwealth.
12. In Werrin v. The Commonwealth ((164) [1938] HCA 3; (1938) 59 CLR 150.), the Court
upheld the validity of s.12A of the Sales Tax Procedure Act 1934 (Cth)
which was passed to prevent the recovery of taxes which ought not to
have been paid having regard to the decision of this Court in Deputy
Federal Commissioner of Taxation (S.A.) v. Ellis and Clark Ltd. ((165)
[1934] HCA 54; (1934) 52 CLR 85.). That case held that sales tax was not payable on
goods which had gone into consumption. After the decision in Ellis and
Clark Ltd., s.12A of the Sales Tax Procedure Act was enacted and
provided that where money had been paid as sales tax in respect of any
goods, a person was not entitled to a refund of the tax paid upon the
ground that, at the time that the tax was paid, the goods had already
gone into use and consumption.
13. The members of the Court who held that s.12A was valid gave
different reasons for their conclusions. Rich J said ((166) Werrin
(1938) 59 CLR at 161.) that "it was clearly within the competence of
the federal Parliament to say that a sum of money erroneously collected
under a tax Act by administrative officers acting in good faith should
be retained". Starke J said that the legislation was a law with
respect to the subject of taxation. Dixon J said ((167) ibid. at
164-165.) that probably more than one head of power could be relied
upon as enabling the federal Parliament "to bar a liability otherwise
resting upon the Crown in respect of tax mistakenly levied upon the
subject under the provisions of a taxing statute". But his Honour
based his decision on the ground that the law was a law with respect to
a matter incidental to the execution of a power vested in the
government of the Commonwealth within the meaning of s.61 and
s.51(xxxix) of the Constitution.
14. Werrin has no binding ratio decidendi. But the judgment of
Dixon J shows that s.51(xxxix) and s.61 as well as the various heads
of power conferred by s.51 can be the source of legislation preventing
the recovery of money unlawfully collected by the executive
government. However in applying the remarks of his Honour, the
background to the enactment of s.12A must be kept in mind. Werrin was
a case where the taxation authorities had acted in good faith on a
view of the legislation which was clearly open. It does not follow
that every law purporting to bar the right to recover money unlawfully
exacted as a "tax" is necessarily a valid law pursuant to the
combination of powers conferred by s.61 and s.51(xxxix). A law
barring recovery which is founded on those two provisions must be
incidental to the execution of a power vested in the Parliament or "in
the Government of the Commonwealth". Barring the right to recover
payments will not be incidental to the execution of such a power if
what the Executive has done was not done in good faith or had no
reasonable connection with a power actually vested in the Executive.
However, if the executive government, acting in good faith, has
mistakenly collected a tax from a person while purporting to act under
a provision of a valid law of the Parliament of the Commonwealth, the
combination of s.61 and s.51(xxxix) is sufficiently comprehensive to
enable the Parliament to enact a law barring recovery of the tax so
paid if the exaction of the tax was reasonably referable to the
provision relied upon to found the assessment.
15. Although the combination of s.61 and the incidental power may
be sufficient to validate or prevent action in respect of unlawful
executive activity in many cases, the power conferred by the various
paragraphs of s.51 to pass retrospective laws or to bar remedies is
more comprehensive. Conduct may be validated under s.51 even though
it was not carried out in good faith or was not reasonably referable
to a power vested in the executive government, provided that the
conduct in question was within one of the heads of power conferred by
s.51. There can be few, if any, examples of a law validating conduct
or barring a remedy concerning a subject matter of s.51, which would
be valid under the combination of s.61 and s.51(xxxix) but which would
not be valid under the relevant head of power conferred by s.51
itself. Thus, s.51(ii) seems the preferable source of power for the
enactment of the Refund Act.
Restrictions on the power to validate conduct
16. The power of the federal Parliament to bar remedies or validate
conduct is subject, however, to two restrictions. One is the
acquisition of property power (s.51(xxxi) of the Constitution). The
other is the principle that what the Parliament cannot do directly, it
cannot do indirectly.
17. Where the conduct which the federal Parliament seeks to validate
or to protect from legal action involves or involved an acquisition of
property, any attempt to validate that conduct or to bar a remedy for
the recovery of that property will be invalid unless it complies with
the provisions of s.51(xxxi) of the Constitution. That is to say, the
legislation validating the acquisition or barring the right to recover
the property will be invalid unless it provides "just terms" for the
acquisition. It is well established that, so far as possible, the
powers conferred by s.51 are to be read subject to the provisions of
s.51(xxxi) which are both a source of power to acquire property and
a constitutional guarantee that property will be acquired by the
Commonwealth only on just terms ((168) Johnston Fear and Kingham and
The Offset Printing Co. Pty. Ltd. v. The Commonwealth [1943] HCA 18; (1943) 67 CLR 314
at 318; Bank of N.S.W. v. The Commonwealth [1948] HCA 7; (1948) 76 CLR 1 at 349, 350;
W.H. Blakeley and Co. Pty. Ltd. v. The Commonwealth of Australia [1953] HCA 12; (1953)
87 CLR 501 at 520; Attorney-General (Cth) v. Schmidt [1961] HCA 21; (1961) 105 CLR 361
at 370-372.).
18. Furthermore, if the federal Parliament had no power to enact the
law which gave rise to the conduct or receipt of money or acquisition
of property, it would seem to follow that the Parliament cannot
validate that conduct, receipt or acquisition or bar remedies in
respect of it. In a federation such as Australia, the legislative and
executive powers of the federating government are circumscribed. To
allow a government of the federation to validate or bar action in
respect of conduct purporting to be done under a statute which it had
no power to enact would be to usurp the constitutional scheme and set
aside the Constitution's allocation of legislative power. If a
legislature has no power to enact a statute, its executive government
has no power to enforce it. A law purporting to bar the recovery of
money collected under such a statute would not be a law with respect
to any relevant head of power. Nor would it be a matter incidental
to any "power vested by this Constitution" in the Parliament or the
government of the Commonwealth within the meaning of s.51(xxxix) of
the Constitution. The validity of a law barring the right to recover
moneys paid under an invalid enactment cannot depend, therefore, on
whether the executive government has acted in good faith and whether
its actions are reasonably referable to a "power" conferred by the
invalid enactment. "The Constitution is not to be mocked by
substituting executive for legislative interference with freedom" of
the citizen ((169) James v. Cowan (1932) AC 542 at 558 per Lord Atkin.).
Nor does the federal Parliament acquire any special power to pass
validating legislation in cases where the government has spent the
moneys raised under the invalid statute. To accept any of these
propositions would mean that the taxpayer would be left in the same
position as if the statute imposing the tax was within the
constitutional power of the government enacting the statute. "If a
State cannot take by unconstitutional means it cannot retain by
unconstitutional means." ((170) Amax Potash Ltd. v. Government of
Saskatchewan (1976) 71 DLR (3d) 1 at 12.) This is simply an
application of the principle that what the legislature cannot do
directly, it cannot do indirectly.
19. In Antill Ranger and Co. Pty. Ltd. v. Commissioner for Motor
Transport ((171) [1955] HCA 25; (1955) 93 CLR 83.) and Barton v. Commissioner for
Motor Transport ((172) [1957] HCA 50; (1957) 97 CLR 633.), the Court held invalid
legislation enacted by the Parliament of New South Wales abolishing the
legal right of the plaintiffs to recover moneys which had been paid by
interstate carriers under legislation which the Privy Council
subsequently held was in breach of s.92 of the Constitution. Because
s.92 withdrew the power to tax interstate carriers, it followed that it
prohibited legislation which sought to prevent the recovery of money
obtained in breach of s.92. On appeal in the Antill Ranger Case ((173)
Commissioner for Motor Transport v. Antill Ranger and Co. Pty. Ltd.
[1956] UKPCHCA 5; (1956) 94 CLR 177 at 179-180.), the Judicial Committee said that
"(n)either prospectively nor retrospectively ... can a State law make
lawful that which the Constitution says is unlawful". In Deacon v.
Grimshaw ((174) [1955] HCA 25; (1955) 93 CLR 83.), the Court also held that the
legislation considered in Antill Ranger was invalid in so far as it
purported to abolish the plaintiff's right of action for the wrongful
detention of his motor vehicle during the course of an interstate
journey.
20. The principle which is the basis of these cases is equally
applicable to cases where the Constitution has not granted to a
Parliament the power to enact the statute which it purported to enact.
It would be a curious result if the Commonwealth, for example, could
bar claims in respect of money obtained by "legislation" outside the
scope of the powers affirmatively granted to it by the Constitution
even though it could not bar claims for the recovery of money obtained
in breach of s.92 of the Constitution. In Canada, the Supreme Court
has held that the Provinces of Canada cannot bar remedies in respect
of conduct purporting to be authorised by a statute going beyond the
Constitution's grant of affirmative powers to the Provinces. Thus, in
Amax Potash Ltd. v. Government of Saskatchewan ((175) (1976) 71 DLR
(3d) 1.), the Supreme Court held invalid a sub-section of the
Proceedings Against the Crown Act, R.S.S. 1965, c.87 which provided
that no proceedings would lie against the Crown in respect of anything
done under a statutory provision which is, was or may be beyond the
jurisdiction of the Legislature. Dickson J, who gave the judgment of
the Court, said ((176) ibid. at 12.):
(I)f a statute is found to be ultra vires the Legislature
which enacted it, legislation which would have the effect of
attaching legal consequences to acts done pursuant to that
invalid law must be equally ultra vires because it relates
to the same subject-matter as that which was involved in
the prior legislation. If a State cannot take by
unconstitutional means it cannot retain by unconstitutional
means."
21. Consequently, where the Parliament of the Commonwealth has
no power to create obligations of the kind which it purported to
create, any right to retain property received in discharge of those
"obligations" would seem to depend upon private law principles such
as change of position etc. The argument for the Commonwealth did not
accept that this was so. The Commonwealth contended that, whatever
the position may be in other federations, s.78 of the Constitution
enabled it to enact legislation preventing the recovery of money owed
by the Commonwealth to a taxpayer even though that money had been
obtained by force of legislation which was outside the power of the
Commonwealth to enact. Section 78 provides:
"The Parliament may make laws conferring rights to
proceed against the Commonwealth or a State in respect of
matters within the limits of the judicial power."
22. It would be surprising if s.78 was intended to enable the federal
Parliament to protect itself against the consequences of enacting a
statute beyond its constitutional powers. The primary purpose of s.78
was to ensure that federal Parliament could remove the immunity of the
Crown in right of the Commonwealth or the States from actions of tort
or breach of contract ((177) See Official Record of the Debates of the
Australasian Federal Convention, Melbourne, 1 March 1898, at
1653-1654.). It is another question whether it was intended to ensure
that the Commonwealth could protect itself in respect of conduct which
is outside the scope of the powers of the Commonwealth. The principle
which is the basis of the decisions in Antill Ranger, Deacon, Barton
and Amax Potash Ltd. would be set at nought if s.78 conferred a power
so comprehensive that it enables the Commonwealth to protect itself
against the consequences of enacting legislation beyond its other
powers. It could hardly be thought that s.78 would authorise the
Parliament to protect the Commonwealth against the consequences of a
breach of s.92 of the Constitution. While the powers conferred by s.51
are conferred "subject to this Constitution", that fact provides no
reason why any distinction should be drawn between a law which is
invalid because it breaches s.92 and a law which is outside the
affirmative grant of powers of the Commonwealth. It seems almost
absurd to think that, relying on s.78, the Commonwealth could bar the
right to bring an action for the recovery of, or damages for, property
acquired by the Commonwealth otherwise than on just terms, contrary to
s.51(xxxi) of the Constitution.
23. Section 78 must be read in the context of a constitutional
document which allocates powers between the Commonwealth and the
States and creates a High Court in which it vests the judicial power
of the Commonwealth for the purpose, inter alia, of enforcing the
Constitution's allocation of power. Because the Constitution creates
the Commonwealth and defines its constitutional powers, rights and
duties, the right to sue the Commonwealth in respect of matters
concerned with the scope of its constitutional powers is arguably
conferred by the Constitution itself (see covering cl.5 and
s.75(iii)). In a case concerned with the scope of the constitutional
powers of the Commonwealth, s.75(iii) of the Constitution, which
declares that the High Court shall have original jurisdiction in all
matters "(i)n which the Commonwealth, or a person suing or being sued
on behalf of the Commonwealth, is a party", might be thought to be
intended to give this Court jurisdiction in a suit which is concerned
with the scope of the constitutional powers of the Commonwealth. In
that respect, it might be thought that the jurisdiction conferred by
s.75(iii) was similar to that conferred by s.75(v), which this Court
has said cannot be taken away by Parliament ((178) The Commonwealth v.
New South Wales [1923] HCA 23; (1923) 32 CLR 200 at 216; R. v. Hickman; Ex parte Fox
and Clinton [1945] HCA 53; (1945) 70 CLR 598 at 614-617; R. v. Commonwealth Rent
Controller; Ex parte National Mutual Life Association of Australasia
Ltd. [1947] HCA 32; (1947) 75 CLR 361 at 369; quoted with approval in R. v. Central
Reference Board; Ex parte Thiess (Repairs) Pty. Ltd. [1948] HCA 9; ; (1948) 77 CLR 123
at 130; O'Toole v. Charles David Pty. Ltd. [1991] HCA 14; (1990) 171 CLR 232 at 292,
306.), notwithstanding that
s.75(iii) is expressed in terms of parties while s.75(v) is expressed
in terms of remedies. If the Constitution does confer the right
to proceed against the Commonwealth in this Court in respect of
constitutional matters, the jurisdiction conferred should extend to
the determination of any question or claim which is not severable from
the determination of the scope of the constitutional powers of the
Commonwealth ((179) cf. Philip Morris Inc. v. Adam P Brown Male
Fashions Pty. Ltd. (1981) 148 CLR 457.).
24. In The Commonwealth v. New South Wales ((180) (1923) 32 CLR 200.),
the Court held that s.75(iii) of the Constitution conferred
jurisdiction on the Court to hear an action in tort brought by the
Commonwealth against a State without the consent of the State. The
decision in The Commonwealth v. New South Wales has never been
overruled although later cases have virtually ignored its reasoning and
acted as if ss.75 and 78 of the Constitution and ss.39, 56 and 64 of
the Judiciary Act 1903 (Cth) or some combination of them is the source
of the Commonwealth's liability in tort and contract ((181) See Maguire
v. Simpson [1977] HCA 63; (1977) 139 CLR 362; The Commonwealth v. Evans Deakin
Industries Ltd. [1986] HCA 51; (1986) 161 CLR 254 at 263-264; Breavington v. Godleman
[1988] HCA 40; (1988) 169 CLR 41 at 68-69 per Mason CJ, 101-105 per Wilson and
Gaudron JJ, 117-118 per Brennan J, 139-140 per Deane J, 151-153 per
Dawson J, 169 per Toohey J See also Cowen and Zines, Federal
Jurisdiction in Australia, 2nd ed. (1978) at 35-38; Wynes,
Legislative, Executive and Judicial Powers in Australia, 5th ed. (1976)
at 455-461.). However, even if, as I think is the case,
s.75(iii) is not itself the source of the Commonwealth's liability
in tort and contract, it may well be that its inclusion in the
Constitution enables an action to be brought against the Commonwealth
in this Court in respect of matters concerning, or not severable from,
the scope of the Commonwealth's constitutional powers. In that event
it would not be open to the federal Parliament to bar the right to
proceed against the Commonwealth in respect of the scope of its
constitutional powers.
25. However, irrespective of the basis of the liability of the
Commonwealth to be sued in this Court, I am of the opinion that the
Refund Act was authorised by s.51(ii) of the Constitution and does not
involve any acquisition of property within the meaning of s.51(xxxi).
It is therefore not necessary for the Commonwealth to rely on s.78 to
support the Refund Act.
The source of validity of the Refund Act
26. In my opinion, subject to the question whether the Refund Act
acquired the property of the taxpayer for the purposes of s.51(xxxi),
it was authorised by the provisions of s.51(ii) of the
Constitution ((182) If the Refund Act constituted an acquisition of
property "for any purpose in respect of which the Parliament has power
to make laws", the only source of power to make the law would be
s.51(xxxi): Johnston Fear (1943) 67 CLR at 318; W.H. Blakeley
(1953) 87 CLR at 521. Thus, a law for the acquisition of a
building for the Department of Taxation is a law made under
s.51(xxxi) and not s.51(ii).). It was not, and could not be, disputed
that, if the Federal Parliament had re-enacted the substance of the
Amending Act and made it operate retrospectively, such an Act would
have been a valid law with respect to taxation within the meaning of
s.51(ii) of the Constitution. Furthermore, it would have been a law
with respect to taxation even if it provided that amounts paid under
the Amending Act were to be "confiscated" and credited towards the
liability of the taxpayer under the re-enacted legislation ((183) Air
Canada v. British Columbia (1989) 59 DLR (4th) 161.). Does it make
any difference that the Refund Act does not impose a retrospective tax
but provides that the moneys refundable by the Commonwealth as the
result of the invalidity of the Amending Act are only to be paid in
accordance with the provisions of the Refund Act, which in some
instances, is to persons other than those who paid the tax?
27. If the Refund Act had provided for no more than a procedure for
repaying the sums collected under the Amending Act to those who had
paid those sums, it would undoubtedly be a law with respect to
taxation. Although such a hypothetical enactment would not itself
impose a tax, the repayment of moneys wrongly collected as taxes is
an incident of the subject matter of taxation; a law dealing with the
consequences of an invalid attempt to collect a tax is as much a law
with respect to taxation as a law providing for the refund of taxes
overpaid. Although it is likely that, in many cases falling within
the operation of the Refund Act, the repayment of the "tax" will be
made to a person other than the taxpayer - because the burden of the
tax was passed onto that person - the Refund Act is a law which deals
with the repayment of moneys unlawfully collected as taxes. It is,
therefore, a law with respect to taxation.
28. Furthermore, the present case is not one which is concerned with
an attempt by the Commonwealth to retain moneys obtained or exacted
by legislation outside the scope of its constitutional powers. The
Amending Act, although invalid by reason of its failure to comply
with s.55 of the Constitution, was nevertheless a law with respect
to taxation within the meaning of s.51(ii) of the Constitution.
Furthermore, to uphold the validity of the Refund Act does not
undermine the constitutional purpose which is performed by s.55, for
it was open to the Senate to delete or amend any provision of the
Refund Act. The Refund Act does not suffer from the defect which
brought down the Amending Act.
29. Accordingly, in my opinion, the Refund Act was a law authorised by
s.51(ii) of the Constitution.
The effect of s.51(xxxi)
30. Section 51(xxxi) provides that the Parliament may make laws with
respect to "(t)he acquisition of property on just terms from any State
or person for any purpose in respect of which the Parliament has power
to make laws". Whether or not the Commonwealth has acquired property
in a particular case is to be examined as a matter of substance and
not form ((184) Bank of N.S.W. v. The Commonwealth (1948) 76 CLR at
349; Trade Practices Commission v. Tooth and Co. Ltd. [1979] HCA 47; (1979) 142 CLR
397 at 407.). If legislation involves an acquisition of property
for the purpose of s.51(xxxi), it must comply with the terms of that
paragraph ((185) Johnston Fear (1943) 67 CLR at 318; W.H. Blakeley
(1953) 87 CLR at 521; Schmidt (1961) 105 CLR at 371-372.). Section
51(xxxi) is, therefore, both a source of power and a guarantee that the
property of a State or an individual citizen will not be sacrificed for
the public welfare of the Commonwealth. If the Parliament wishes to
acquire property belonging to a State or individual, the cost of the
acquisition has to be borne by the taxpayers of the Commonwealth and
not by the owner of the property. However, not every taking or receipt
of property by the Commonwealth constitutes an acquisition of property
for the purpose of s.51(xxxi). In Attorney-General (Cth) v. Schmidt
((186) [1961] HCA 21; [1961] HCA 21; (1961) 105 CLR 361 at 372.), Dixon CJ, with the concurrence
of Fullagar, Kitto, Taylor and Windeyer JJ, said that s.51(xxxi) "does
not mean that property can never pass to or become vested in the
Commonwealth or its officers except under a law made in pursuance of"
that paragraph.
31. When the taking of property is an inevitable consequence of the
exercise of a power conferred by s.51 ((187) See The Commonwealth v.
Tasmania (The Tasmanian Dam Case) [1983] HCA 21; (1983) 158 CLR 1 at 282 per Deane J)
or is a reasonably proportional consequence of a breach of a lawpassed under one of those powers, no acquisition of property within the
32. Although I have previously been attracted to the view that
taxation does not involve any acquisition of property by the
Commonwealth ((192) See Australian Tape Manufacturers (1993) 176 CLR at
528 where I agreed generally with the reasons of Dawson and Toohey JJ)
the elaborate argument on s.51(xxxi) which the Court heard in thiscase and the associated cases of Health Insurance Commission v.
33. Similarly, when a statute provides for the forfeiture of property
obtained in breach of Commonwealth law even when the property has
passed into the hands of a bona fide purchaser for value, the case is
outside s.51(xxxi). The notion that the Commonwealth should pay fair
compensation to the owner of the property in such a situation is
simply absurd. In Burton v. Honan ((197) [1952] HCA 30; (1952) 86 CLR 169.), the
Court upheld the validity of provisions of the Customs Act 1901 (Cth)
which provided, inter alia, for the forfeiture of goods obtained as the
result of breaches of the Customs (Import Licensing) Regulations.
Dixon CJ said ((198) ibid. at 180-181.):
"(T)he whole matter lies outside the power given by
s.51(xxxi.). It is not an acquisition of property for any
purpose in respect of which the Parliament has power to make
laws. It is nothing but forfeiture imposed on all persons
in derogation of any rights such persons might otherwise
have in relation to the goods, a forfeiture imposed as part
of the incidental power for the purpose of vindicating the
Customs laws. It has no more to do with the acquisition of
property for a purpose in respect of which the Parliament
has power to make laws within s.51(xxxi.) than has the
imposition of taxation itself, or the forfeiture of goods in
the hands of the actual offender."
34. Similarly, in Schmidt, the Court upheld legislation, the effect of
which was (1) to preclude the return to German ownership of property,
taken control of in Australia in wartime, and (2) to apply the
property in or towards the satisfaction of claims upon Germany for war
reparations. The Court held that the legislation was a valid law with
respect to the defence power. Dixon CJ said ((199) Schmidt (1961)
105 CLR at 373.) that the "whole subject is altogether outside the
scope of s.51(xxxi)".
35. Thus, Burton, Schmidt and Clyne establish that, if the purpose of
a law passed under s.51 is to impose sanctions for breach of a law
passed under that section or to use the property of alien enemies to
satisfy war reparations or to facilitate the collection of taxes, that
law is not within the scope of s.51(xxxi) even though it incidentally
or even directly results in the Commonwealth acquiring the property of
a State or person. Such a law is not a law for the acquisition of
property for a purpose "in respect of which the Parliament has power
to make laws" but an exercise of the power itself. It would have been
absurd, for example, to construe the laws considered in Burton and
Clyne as providing for the acquisition of property for the purposes
of s.51(xxxi). The notion of paying compensation for the property
acquired was incompatible with the purpose for which the law was
enacted and the power exercised. The nature of the law considered in
Schmidt was no doubt more debatable. However, the three cases are
authority for the general proposition that, where the particular
implementation of a valid exercise of s.51 power necessarily involves
an acquisition of property or is a reasonably proportional sanction
for a breach of a s.51 law, the acquisition is outside the scope of
s.51(xxxi).
The Refund Act does not involve an acquisition of property for the
purpose of s.51(xxxi)
36. In the light of these principles, the Refund Act does not involve
any acquisition of property for the purpose of s.51(xxxi).
37. No doubt the promise made by the Commissioner on behalf of
the Commonwealth to repay the money constituted a chose in action
enforceable against the Commonwealth. The chose in action was also
property for the purpose of s.51(xxxi) ((200) Minister of State for the
Army v. Dalziel [1944] HCA 4; (1944) 68 CLR 261 at 290; Bank of N.S.W. v. The
Commonwealth (1948) 76 CLR at 299, 349.). In some circumstances,
it could attract the protection of that paragraph. For example,
the chose in action would constitute property for the purpose of
s.51(xxxi) if a federal enactment purported to acquire all the
property of the plaintiff.
38. Furthermore, in substance the Commonwealth has acquired the chose
in action of the plaintiff. In The Tasmanian Dam Case ((201) (1983)
158 CLR at 145.), Mason J pointed out:
"(I)t is not enough that legislation adversely affects orThe Refund Act, however, did more than terminate the plaintiff's
terminates a pre-existing right that an owner enjoys in
relation to his property; there must be an acquisition
whereby the Commonwealth or another acquires an interest in
property, however slight or insubstantial it may be".
39. In construing an important constitutional guarantee such as
s.51(xxxi), the Court must be astute to ensure that the Parliament
does not evade the guarantee by devices which have the effect that
in substance, although not in form, the Commonwealth acquires the
property of a State or individual without providing just terms. What
may be regarded as an extinguishment and not an acquisition of
property rights under the general law of property may have to be
regarded differently in the context of a constitutional guarantee
such as s.51(xxxi). Thus, when the Parliament legislates so as to
extinguish a property right of a person or State which is not
dependent for its continued existence on federal law and the effect of
the extinguishment is to vest a corresponding benefit of commensurate
value in the Commonwealth, the law should be characterised as one
providing for the acquisition of the property of that person or State
by the Commonwealth. Thus, if the Commonwealth legislates to abolish
a right of way over its land, it acquires that right of way even
though the legislation does no more than free the land of an
encumbrance. Similarly, when the Parliament legislates to abolish
a debt of the Commonwealth, the legislation should be seen as an
acquisition of property by the Commonwealth. The common law has never
treated "indebtedness in a sum certain for an executed consideration
as a mere breach of contract: it is rather the detention of a sum of
money" ((202) Young v. Queensland Trustees Ltd. [1956] HCA 51; (1956) 99 CLR 560 at
567.). In a case such as the present, the substantial effect of the
legislation is that the Commonwealth acquires that sum of money for
itself.
40. Nevertheless, the Refund Act did not involve an acquisition
of property for the purpose of s.51(xxxi). If the Parliament had
re-enacted the substance of the Amending Act, given it a retrospective
operation, and provided that moneys paid under the invalid Amending
Act were to be set off against the taxes levied under the
re-enactment, no question of acquisition of property would arise ((203)
cf. Air Canada v. British Columbia (1989) 59 DLR (4th) 161.). If, in
those circumstances, the Commonwealth would not have acquired the
property of the plaintiff for the purposes of s.51(xxxi) of the
Constitution, how can its election to enact the Refund Act to repay
those moneys to those who have borne the burden of the invalid tax
constitute an acquisition of property for the purpose of s.51(xxxi)?
41. The purpose of the Refund Act is to repay the "taxes" unlawfully
obtained as the result of the enforcement of a law which was
authorised by the taxation power but invalid because it breached s.55
of the Constitution. It is correctly characterised as a law with
respect to taxation for the purpose of s.51(ii). What is validly
within s.51(ii) is outside s.51(xxxi), for the two powers are mutually
exclusive. In so far as the Refund Act acquires property, it does so
incidentally. The acquisition of property is merely an incident of a
law which seeks to repay invalid taxes to those who have really borne
the burden of paying the "taxes". An enactment can fall within
s.51(ii) and outside the operation of s.51(xxxi) even though it
provides for the acquisition of property and does not itself impose
a tax, provided that it is a law with respect to taxation. Thus,
in Clyne, the imposition of provisional tax was held to be outside
s.51(xxxi) even though the liability to pay provisional tax was "not
a separate tax but a liability ancillary to the income tax and social
service contribution which s.17 of the Assessment Act provides shall
be levied and paid ... for each financial year, upon the taxable
income derived during the year of income by any person" ((204) (1958)
100 CLR at 260 per Dixon CJ). Consequently, the Refund Act did not
effect an acquisition of property for the purpose of s.51(xxxi).
42. The questions in the case stated should be answered as follows:
Q.(1) Yes.
Q.(2) No.
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