Melbourne Corporation Case and Federalism

The engineers case came like a torrent. It crushed the doctrine of reserved powers and it also destroyed with the idea of implied immunities. And on top of it all, it established a new approach to interpreting the Australian Constitution. But how are we to live in a federal country with a federal constitution without considering the functions and the role of the states? Are we to keep on letting the Commonwealth expand its powers indefinitely? Wouldn't this eventually distract the whole of the federal structure, which is at the basis of our constitution? Shouldn't we impose at least some sort of restraint on the expansion of Commonwealth powers? This is where the Melbourne Corporation document comes on the stage. Hello everyone, my name is Renato Costa, this is Aussie Law, and today we will look at a case called Melbourne Corporation and the Commonwealth of 1947. In this case, the High Court of Australia toned down the implications of the engineers case of 1920 and imposed some sort of limitations on the increasingly expensive powers of the Federal Commonwealth. If you haven't had the opportunity yet, I would invite you to click on the top right corner and watch the video about the Engineer's case. And since we are talking about it, why don't you subscribe to our channel and hit the bell sign, because that's the way you're not going to miss out any of our videos about Constitutional Law in Australia and Constitutional cases. So, in the Engineer's case, we saw that the High Court of Australia decided that the Constitution was to be interpreted literally. This means that there's no need to find limits to the Constitution. to the Commonwealth powers if those limits are not expressed in the text of the Australian Constitution. And we saw that this actually led to an incrementation of the powers of the Federal Commonwealth. From 1920 the states became virtually emasculated by the continuous expansion of Federal Commonwealth powers under section 51 of the Australian Constitution. And this is the backdrop, the scenario behind the case that we're about to see now. So let's go to the facts. The Melbourne Corporation was a local government authority created by the City of Melbourne to administer certain public facilities and buildings in Melbourne. They used the National Bank of Australasia as their private trading bank. But in 1945 the Commonwealth enacted a law called Banking Act. That law was enacted by the Commonwealth under section 51 of the Australian Constitution. which gave the Commonwealth banking powers, section 48 of the Act established that any state or local government authority would have to bank with the Commonwealth Bank exclusively, except if the Federal Treasurer approved otherwise. So the Melbourne Corporation sought a declaration from the High Court that section 48 of that Act was actually invalid. So the question that the High Court had to answer was the following question. Could the Federal Commonwealth, using the powers of section 51 of the Australian Constitution control a state authority? Is there any prohibition in the federal constitution that would prevent the federal Commonwealth from interfering in the states in that manner? Even though the law could be fairly characterized within the scope of the banking power under section 51 and despite the fact that the implied immunities had been erased by the High Court In the engineers case, the majority of the High Court found that the Constitution implicitly prohibited that sort of interference of the Commonwealth in the states. Let's understand why they decided this case like this by taking a look at some of the decisions, some of the opinions of the justices of the High Court of Australia. Chief Justice Latham, in the majority, said that although we cannot interpret the Constitution with the presumption that there are certain powers that are reserved to the states. We cannot consider the states to be subordinate to the Commonwealth either. The states are not subjects of the Federal Commonwealth. In a federation, each level of government is sovereign in their own sphere. So Chief Justice Latham said that that particular law was not really a law about banking, but was destined it aimed at the states so it wasn't a law that could find a head of power under section 51 because that law wasn't addressed to the commonwealth but was actually made for the states and the Commonwealth couldn't do that. If that was the case, that the Commonwealth was legislating not about banking but to the states, then section 51 was not a genuine head of power and the Commonwealth didn't have any head of power in the Constitution to enact that law because section 51 does not authorize the Commonwealth to legislate for the states. Look, if the Commonwealth had enacted a law about banking, and for the Commonwealth, and somehow that law had spilled over to the states, then it seems to me that if that was the case, Chief Justice Latham would have held that the law was actually valid. However, the problem here was that the Commonwealth was using its supposed powers under Section 51 to legislate for the states. In this sense, as his honor said, this law was discriminatory. The rest of the majority in that case was made up by Justices Dixon, Rich, Stark and Williams. Although they agreed with Chief Justice Latham that the law was invalid, they actually found that the law could be characterised under section 51 of the Australian constitution. The only thing was that they found certain limitations to what the Commonwealth could do with that law particularly. So for them the law was invalid as well, they just found a different reasoning for it. Justice Dixon said that the Constitution was clear in establishing that the Commonwealth and the states were independent of each other. There is a distinction between the functions and the powers of each sphere. Look at what his Honor said. The foundation of the Constitution is the conception of a central government and a number of state governments separately organized. The fact that Section 48 of the Banking Act prevents the state treasurer from choosing where to bank, makes of this law, according to Justice Dixon, a law directly operating to deny to the state's banking facilities open to others and so to discriminate against the states or to impose a disability upon them. Justice Williams also based his opinion on the Australian federal system. He said, there arises from the very nature of the federal compact a necessary implication that neither the Commonwealth nor the States may exercise their respective constitutional powers for the purpose of affecting the capacity of the other to perform its essential governmental functions. Justice Rich, by considering the federal character of the Australian Constitution and also by considering that one sphere should not discriminate against the other, created sort of two limbs or two prohibitions in this Melbourne Corporation case. His Honour said that any action on the part of the Commonwealth in purported exercise of its constitutional powers, which would prevent a state from continuing to exist and function as such, is necessarily invalid because inconsistent with the express provisions of the Constitution. So, in his honest opinion, any Commonwealth legislation would be invalid if it attempted 1. to single out the states and its agencies, that is, if it tried to discriminate against the states and its governmental functions. And two, even if it didn't single out the states, the law would still be invalid if it somehow, in its general application, impeded or interfered with the states and its agencies in exercising their essential governmental functions. These two prohibitions were also confirmed by the High Court later on, in a case called Victoria and the Commonwealth of 1971, also known as the Payroll Tax Case. And again in 1985, in the Queensland Electricity Commission case against the Commonwealth. These two prohibitions established by the banking case is also known as the Melbourne Corporation Doctrine. So let me repeat them. 1. There is a prohibition against discrimination. which involves the placing of special burdens or disabilities on the states. 2. There's a prohibition against laws of general application which operate to destroy or curtail the existence of the states or their capacity to function as governments. The principle behind these two limbs is that the Commonwealth cannot impair the capacity of the states to function effectively as independent governments. So although in the engineers case the High Court found a principle that was expanding the powers of the Commonwealth, now we have a doctrine, the Melbourne Corporation doctrine, that states that the states have to function effectively as independent governments. And the outcome of the banking case was that the High Court held that section 48 of the Commonwealth Banking Act of 1945 was invalid. And until today we have a new doctrine, the Melbourne Corporation Doctrine, which is not the same thing as the implied intergovernmental immunities, but it does prevent the Commonwealth from discriminating against the states and impedes the Commonwealth from preventing the states from operating as states or from exercising their governmental functions. So this was the banking case. and the Melbourne Corporation Doctrine. I hope you enjoyed this video. If you did, don't forget to like it and to subscribe to our channel. And hit the bell sign, because that way you're gonna know every time I upload a new video and you're not gonna miss any of them. I hope to see you again soon. Until then, ciao!

But how are we to live in a federal country with a federal constitution without considering the functions and the role of the states? Are we to keep on letting the Commonwealth expand its powers indefinitely? Wouldn't this eventually distract the whole of the federal structure, which is at the basis of our constitution?

Shouldn't we impose at least some sort of restraint on the expansion of Commonwealth powers? This is where the Melbourne Corporation document comes on the stage. Hello everyone, my name is Renato Costa, this is Aussie Law, and today we will look at a case called Melbourne Corporation and the Commonwealth of 1947. In this case, the High Court of Australia toned down the implications of the engineers case of 1920 and imposed some sort of limitations on the increasingly expensive powers of the Federal Commonwealth. If you haven't had the opportunity yet, I would invite you to click on the top right corner and watch the video about the Engineer's case. And since we are talking about it, why don't you subscribe to our channel and hit the bell sign, because that's the way you're not going to miss out any of our videos about Constitutional Law in Australia and Constitutional cases.

So, in the Engineer's case, we saw that the High Court of Australia decided that the Constitution was to be interpreted literally. This means that there's no need to find limits to the Constitution. to the Commonwealth powers if those limits are not expressed in the text of the Australian Constitution.

And we saw that this actually led to an incrementation of the powers of the Federal Commonwealth. From 1920 the states became virtually emasculated by the continuous expansion of Federal Commonwealth powers under section 51 of the Australian Constitution. And this is the backdrop, the scenario behind the case that we're about to see now. So let's go to the facts. The Melbourne Corporation was a local government authority created by the City of Melbourne to administer certain public facilities and buildings in Melbourne.

They used the National Bank of Australasia as their private trading bank. But in 1945 the Commonwealth enacted a law called Banking Act. That law was enacted by the Commonwealth under section 51 of the Australian Constitution.

which gave the Commonwealth banking powers, section 48 of the Act established that any state or local government authority would have to bank with the Commonwealth Bank exclusively, except if the Federal Treasurer approved otherwise. So the Melbourne Corporation sought a declaration from the High Court that section 48 of that Act was actually invalid. So the question that the High Court had to answer was the following question. Could the Federal Commonwealth, using the powers of section 51 of the Australian Constitution control a state authority?

Is there any prohibition in the federal constitution that would prevent the federal Commonwealth from interfering in the states in that manner? Even though the law could be fairly characterized within the scope of the banking power under section 51 and despite the fact that the implied immunities had been erased by the High Court In the engineers case, the majority of the High Court found that the Constitution implicitly prohibited that sort of interference of the Commonwealth in the states. Let's understand why they decided this case like this by taking a look at some of the decisions, some of the opinions of the justices of the High Court of Australia. Chief Justice Latham, in the majority, said that although we cannot interpret the Constitution with the presumption that there are certain powers that are reserved to the states. We cannot consider the states to be subordinate to the Commonwealth either.

The states are not subjects of the Federal Commonwealth. In a federation, each level of government is sovereign in their own sphere. So Chief Justice Latham said that that particular law was not really a law about banking, but was destined it aimed at the states so it wasn't a law that could find a head of power under section 51 because that law wasn't addressed to the commonwealth but was actually made for the states and the Commonwealth couldn't do that. If that was the case, that the Commonwealth was legislating not about banking but to the states, then section 51 was not a genuine head of power and the Commonwealth didn't have any head of power in the Constitution to enact that law because section 51 does not authorize the Commonwealth to legislate for the states.

Look, if the Commonwealth had enacted a law about banking, and for the Commonwealth, and somehow that law had spilled over to the states, then it seems to me that if that was the case, Chief Justice Latham would have held that the law was actually valid. However, the problem here was that the Commonwealth was using its supposed powers under Section 51 to legislate for the states. In this sense, as his honor said, this law was discriminatory.

The rest of the majority in that case was made up by Justices Dixon, Rich, Stark and Williams. Although they agreed with Chief Justice Latham that the law was invalid, they actually found that the law could be characterised under section 51 of the Australian constitution. The only thing was that they found certain limitations to what the Commonwealth could do with that law particularly.

So for them the law was invalid as well, they just found a different reasoning for it. Justice Dixon said that the Constitution was clear in establishing that the Commonwealth and the states were independent of each other. There is a distinction between the functions and the powers of each sphere. Look at what his Honor said.

The foundation of the Constitution is the conception of a central government and a number of state governments separately organized. The fact that Section 48 of the Banking Act prevents the state treasurer from choosing where to bank, makes of this law, according to Justice Dixon, a law directly operating to deny to the state's banking facilities open to others and so to discriminate against the states or to impose a disability upon them. Justice Williams also based his opinion on the Australian federal system. He said, there arises from the very nature of the federal compact a necessary implication that neither the Commonwealth nor the States may exercise their respective constitutional powers for the purpose of affecting the capacity of the other to perform its essential governmental functions.

Justice Rich, by considering the federal character of the Australian Constitution and also by considering that one sphere should not discriminate against the other, created sort of two limbs or two prohibitions in this Melbourne Corporation case. His Honour said that any action on the part of the Commonwealth in purported exercise of its constitutional powers, which would prevent a state from continuing to exist and function as such, is necessarily invalid because inconsistent with the express provisions of the Constitution. So, in his honest opinion, any Commonwealth legislation would be invalid if it attempted 1. to single out the states and its agencies, that is, if it tried to discriminate against the states and its governmental functions. And two, even if it didn't single out the states, the law would still be invalid if it somehow, in its general application, impeded or interfered with the states and its agencies in exercising their essential governmental functions.

These two prohibitions were also confirmed by the High Court later on, in a case called Victoria and the Commonwealth of 1971, also known as the Payroll Tax Case. And again in 1985, in the Queensland Electricity Commission case against the Commonwealth. These two prohibitions established by the banking case is also known as the Melbourne Corporation Doctrine. So let me repeat them.

1. There is a prohibition against discrimination. which involves the placing of special burdens or disabilities on the states. 2. There's a prohibition against laws of general application which operate to destroy or curtail the existence of the states or their capacity to function as governments. The principle behind these two limbs is that the Commonwealth cannot impair the capacity of the states to function effectively as independent governments.

So although in the engineers case the High Court found a principle that was expanding the powers of the Commonwealth, now we have a doctrine, the Melbourne Corporation doctrine, that states that the states have to function effectively as independent governments. And the outcome of the banking case was that the High Court held that section 48 of the Commonwealth Banking Act of 1945 was invalid. And until today we have a new doctrine, the Melbourne Corporation Doctrine, which is not the same thing as the implied intergovernmental immunities, but it does prevent the Commonwealth from discriminating against the states and impedes the Commonwealth from preventing the states from operating as states or from exercising their governmental functions.

So this was the banking case. and the Melbourne Corporation Doctrine. I hope you enjoyed this video.

If you did, don't forget to like it and to subscribe to our channel. And hit the bell sign, because that way you're gonna know every time I upload a new video and you're not gonna miss any of them. I hope to see you again soon.

Until then, ciao!

Transcript for:Melbourne Corporation Case and Federalism

Transcript for:
Melbourne Corporation Case and Federalism