If they could see us now — what would the founders say?
Chief Justice Robert French AC
18 July 2013, Perth
Beginnings — The formation of the Federation
In the last decade of the nineteenth century Australia consisted of six self-governing colonies each of which had a constitution authorised by an Act of the Parliament of the United Kingdom. For some decades before the 1890s there had been discussion of the possibility that the colonies would agree to form a federation. As Professor JA La Nauze put it in his book The Making of the Australian Constitution before and after the mid 1850s when the colonies began to govern themselves under systems of parliamentary responsible government:
The prospect of the 'night of provincialism' that was likely to descend upon them alarmed some of the more thoughtful colonial politicians, administrators and journalists.1 Other factors stimulating discussion of federation included rumours of colonising activity in the region by France and Germany. Indeed, fearing German designs on New Guinea, the Premier of Queensland in the 1880s tried to take possession of it in the name of the Queen. Although approved in the colonies his action was repudiated by the Imperial Government. The French were said to have designs upon the New Hebrides and arranging their own transportation of criminals to New Caledonia. Quick and Garran wrote in 1901 in their Annotated Constitution of the Australian Commonwealth:
In this emergency the colonies found that disunion hampered them in making proper representations to the Imperial Government, and weakened the effect of what representations they made. Here was a practical and convincing argument for Federation ...2 A Federal Council of Australasia was formed in 1883 supported and given limited legislative powers by an Imperial Act of 1885. While it was an omen of things to come, it was something of a dead letter for most of its existence and was overtaken by the convening of the National Australasian Conventions in the 1890s to draft and put to the people of the colonies a proposed constitution for a federated Australia.
The process of federation began in earnest with the convening, at the instigation of Henry Parkes, the Premier of New South Wales, of a conference in Melbourne on 6 February 1890 at which the six Australian colonies and New Zealand were represented by delegates of their respective governments. They were Henry Parkes, the Premier of New South Wales and William McMillan, the Colonial Treasurer of that colony; Duncan Gillies, the Premier of Victoria and Alfred Deakin, the Chief Secretary; Sir Samuel Griffith the Leader of the Opposition in Queensland and John Macrossan, the Colonial Secretary; John Cockburn, the Premier of South Australia and Thomas Playford, the Leader of the Opposition; Andrew Inglis Clark, the Attorney-General of Tasmania and Bolton Bird the Treasurer; and Sir James Lee Steere, the Speaker of the West Australian Parliament. New Zealand also sent two representatives: Captain Russell, the Colonial Secretary and Sir John Hall, out of what La Nauze called 'politeness'.
Two famous phrases were uttered at a banquet which encapsulated themes of the decade-long process of making a constitution that was to follow. One concerned the tariff question, which was described as 'the lion in the path' which federalists must either slay or be slain by. The other was Sir Henry Parkes' utterance reflecting an underlying theme of racial identity when he said:
The crimson thread of kinship runs through us all.3 The Conference adopted a resolution proposed by Sir Henry Parkes:
That, in the opinion of this Conference, the best interests and the present and future prosperity of the Australian colonies will be promoted by an early union under the Crown, and while fully recognizing the valuable services of the Convention of 1883 in founding the Federal Council, it declares its opinion that the seven years which have since elapsed have developed the national life of Australia in population, in wealth, in the discovery of resources, and in self-governing capacity to an extent which justifies the higher act, at all times contemplated, of the union of the colonies, under one legislative and executive government, on principles just to the several colonies.4 As a result of that conference, a National Australian Convention met in 1891 to consider a draft constitution in sessions which were held in 1891. The draft which emerged from that process was an important achievement and, as Quick and Garran observed, 'marked a notable advance in the movement.' For a variety of reasons to do with local politics it did not find acceptance in the parliaments of the colonies. Nevertheless it defined the most important elements of the Constitution that was ultimately adopted.
The process of drafting a constitution acceptable to the colonies then fell into abeyance until it was revived in 1897 and 1898 in Conventions held in Adelaide, Sydney and Melbourne, which ultimately produced the Constitution Bill that was accepted by all the colonies including, belatedly, Western Australia, and led to the enactment of the Commonwealth of Australia Constitution Act 1901 (UK) and the creation, on 1 January 1901, of the Commonwealth of Australia.
Curtin and uniform taxation
This lecture seeks to illustrate some of the ways in which the Australian Federation has developed over the one hundred and twelve years since it came into existence. John Curtin, Australia's great wartime Prime Minister, whose memory we honour today, played a significant part in that development. The part he played highlights an important proposition. Despite the preoccupations of some commentators with the effects of High Court decisions on relations between the Commonwealth and the States, it is the elected representatives of the people in Commonwealth and State Parliaments, whose actions as legislators and as members of the executive government are the drivers of change in the way the federation works. The High Court is the final judicial interpreter of the Constitution, but it only carries out that function when disputes involving questions arising under the Constitution are brought before it for determination. The role of the Court in the functioning of the Federation is important, but not that of a prime mover. Decisions of the Court may affect, but are not uniquely determinative, of the shape of the Federation and in particular the working relationships between Commonwealth and State governments. There are legislative and executive actions and co-operative arrangements between governments that may be very significant but which never see the light of day in the High Court because nobody has an interest in challenging them.
John Curtin became Prime Minister of Australia in October 1941. Robert Menzies had won government at the election in September 1940 with the support of two Independent Members of the House of Representatives. However, Menzies resigned under pressure from Conservative Members of Parliament on 28 August 1941. Arthur Fadden took over from him and governed until 3 October 1941 when the two Independents withdrew their support. Curtin was then able to form a government. His legislative program had been foreshadowed in an election speech in 1940 when he promised to take 'monetary measures ... so that industrial and economic preparedness, which are the essence of national defence and security, shall be assured'.5 Those measures included national control of banking and credit, interest rates and investment. He promised a greatly enlarged role for the Commonwealth in the management of the nation's affairs. His vision went beyond the exigencies of wartime as reflected in the concluding lines of his election speech:
We have to plan with the entire resources of this nation to win the war and we also have to plan with the entire resources of this nation to win the peace.6 In February 1942, Curtin announced a National Economic Plan with strong regulatory powers in relation to prices and profits, interest rates and wages. One measure, in particular, which he introduced in 1942 has been credited with changing the nature of the federation. That was the Uniform Tax Scheme which, in a political sense, placed effective control of income tax in the hands of the Commonwealth.7 The Scheme was not the first entry of the Commonwealth into the field of income taxation. Only 15 years elapsed from federation to the enactment of the first Commonwealth Income Tax Assessment Act 1915. That legislation was initially proposed for the purpose of funding the war effort in the First World War. The Labor Attorney-General, Billy Hughes, said in his Second Reading Speech:
That additional revenue is necessary to meet the great and growing liabilities of the war is amply apparent.
But foreshadowing things to come he went on:
I have always regarded this form of direct taxation as peculiarly appropriate to the circumstances of a moderate community. ... Not only an effective means for raising money for the conduct of government but serving as an instrument of social reform.8 As one commentary has observed, his speech did 'provide a hint of potentially deeper motives'.9 The 1915 Act did not have the effect of creating any Commonwealth monopoly with respect to the raising of revenue through income taxation. Concurrent State laws continued to impose their own separate and distinct income taxes. Following the Great Depression and the onset of World War II there were discussions between the Commonwealth and the States about the possibility of a political arrangement under which the States would vacate the field of income taxation in favour of the Commonwealth subject to receiving compensation for lost revenue. An attempt to reach an agreement to that effect at the 1942 Premiers' Conference was not successful. There was no support from any State for Commonwealth proposals to take over income tax.10 The Commonwealth Government under John Curtin then moved unilaterally.
On 7 June 1942, the Commonwealth Parliament enacted legislation constituting Australia's first Uniform Tax Scheme. It had four components. The first was the Income Tax Act 1942 (Cth) which imposed income tax at a level which would raise the same amount of revenue as was being raised by Commonwealth and State Governments collectively. The second component, the States Grants (Income Tax Reimbursement) Act 1942 (Cth) provided for grants to be made to each State in any year in which the Treasurer was satisfied that the State had not itself imposed a tax on incomes. That Act relied upon the power conferred upon the Parliament by s 96 of the Constitution to 'grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.' The third component was a provision introduced into the Income Tax Assessment Act1936 (Cth) by the Income Tax Assessment Act 1942 (Cth) which made it an offence for a taxpayer to pay a State income tax until Commonwealth tax was paid. This was a priority provision. The fourth component, the Income Tax (Wartime-Arrangements) Act 1942 (Cth) provided for the transfer to the Commonwealth of State staff involved in the collection of income tax and of office accommodation, furniture and equipment.
The First Uniform Tax case
The validity of the scheme was challenged by South Australia, Victoria, Queensland and Western Australia. The case was heard by five Justices of the Court. Sir Owen Dixon did not sit. He was serving in the United States as Australia's Ambassador. There was concern in some political circles that the High Court might strike the scheme down. Some not very veiled threats were made. The Minister for Trade and Customs, Senator Keane, said:
if the day came in this country when the High Court interfered with the considered decisions of the elected representatives of the people its position might have to be examined.11 The High Court dismissed the States' challenge in what became known as the First Uniform Tax case.12 The fact that it had become politically impossible for the States to impose their own income taxes did not affect the validity of the Commonwealth laws. The Chief Justice, Sir John Latham, drew an important distinction between the legal questions which had to be decided by the Court and the wider political questions which were outside its authority. He said:
the controversy before the Court is a legal controversy, not a political controversy. It is not for this or any court to prescribe policy or to seek to give effect to any views or opinions upon policy. We have nothing to do with the wisdom or expediency of legislation. Such questions are for Parliaments and the people.13 The majority in the Court held that, notwithstanding its political consequences, the Scheme did not legally bar the States from levying their own income taxes. It provided a financial inducement which they could accept or reject. The judgments of the Court relied in part upon the power conferred on the Commonwealth by s 51(ii) of the Constitution to make laws with respect to taxation. The laws thus rested upon a constitutional foundation which did not depend upon the defence power. That meant the Scheme could continue after the war.14 Robert Menzies commented after the decision that it marked 'the end of the Federal era in this country.' Another leading scholar, KC Wheare, also observed in the early 1950s that in Australia 'tendencies [were] at work which may make it necessary soon to describe its Constitution and its Government as quasi federal'.15 However as Professor Saunders observed:
Neither proved correct. The 1942 case is a fairly extreme example of laissez-faire on the part of the Court, driven by both the circumstances of the time and the prevailing mode of interpretation. The Australian High Court in fact has been far more ready to enforce the constitutional boundaries of federalism than has the Supreme Court of the United States.16 The absence of Sir Owen Dixon in the First Uniform Tax case was no doubt a matter of some significance and, as will be seen, his presence led to a different result in one important respect when the case was revisited in 1957. His absence gave rise to an entertaining little anecdote reflective of personalities on the Court in the 1940s. In the course of argument in the State Banking case17 in 1947 when counsel referred to the absence of Sir Owen in the First Uniform Tax case, Starke J is said to have commented 'no, worse luck'.18 Professor Saunders recounts that when Geoffrey Sawer, on the teaching staff at Melbourne Law School, set a question in his constitutional law examination inviting students to comment on the implications of Starke's remark, it drew a letter of complaint from Sir John Latham to the Chancellor of the University and ultimately to a promise from the Dean of Law, Professor Paton, that 'further papers will be carefully scrutinized from every angle'.19 The Second Uniform Tax case
Following the election of the Menzies government in 1949, consideration was given to the return of income taxation to the States. An intergovernmental working party examined issues that arose out of different polities in the federation imposing income tax, but the examination did not lead anywhere.20 The State of Victoria commenced proceedings in 1955 to again challenge the constitutional validity of the Scheme. New South Wales issued its own proceedings in 1956. Seven Justices of the Court, including Sir Owen Dixon who had become Chief Justice, sat to hear the case in April 1957. In what became known as the Second Uniform Tax case21 the High Court reaffirmed the validity of the grants legislation supported by s 96 of the Constitution but held that the priority provision, which made it an offence for a taxpayer to pay State income tax until Commonwealth income tax was paid, was invalid. It was an intrusion upon the Constitutions of the States.
Notwithstanding the invalidity of the priority provision, the Second Uniform Tax caseconfirmed the fiscal dominance of the Commonwealth. That dominance was underpinned by the coupling of the taxation power with the power of the Commonwealth to make conditional grants to the States under s 96 of the Constitution. To that could be added the exclusive nature of the power of the Commonwealth to make laws imposing excise duties. Despite her rejection of the proposition that the decisions marked the end of federalism, Professor Saunders accepted that they symbolised a 'turning point in Australian constitutionalism'.22 When it comes to fiscal dominance, the Commonwealth has never really looked back although, as appears later, its powers in this field have been held to be subject to certain implied limitations protecting the governmental capacities of the States.
The Founders and tax
It is interesting in the light of the Uniform Tax Scheme decisions to go back in time to the National Australasian Convention held in 1891 when delegates from the Australian colonies first met to frame a proposed draft Constitution and debated the powers to be given to the Commonwealth with respect to taxation. The focus of their discussions was on the power to impose duties of customs and excise.23 There was opposition from some delegates to allowing the Commonwealth wide-ranging powers. They argued that the Commonwealth would raise sufficient money for its purposes by the exercise of an exclusive power to impose customs and excise duties. That argument might be thought to have reflected a rather minimalist view of the future requirements of the Commonwealth Government. A South Australian delegate, Sir John Bray said:
Personally, I feel that we ought not to give the federal parliament this power unless we know to a greater extent than we do at the present time, the purposes to which the revenue is to be applied.24 Arguments in favour of a broad taxation power included the proposition that it was necessary for the defence of the Commonwealth that it have such a power. Alfred Deakin said:
It is impossible to cast the duty of defence on the government of the commonwealth without giving them unlimited taxing power.25 Alfred Deakin and Samuel Griffith both assured the 1891 Convention that the taxation power would be exercised concurrently with and would not 'take away' from existing colonial powers.26 Griffith went further and expressed his belief that the Commonwealth Parliament 'would never impose direct taxation excepting in a case of great national urgency'.27 Mr McMillan added that the Commonwealth Parliament 'will never go beyond Customs; nobody dreams of such a thing'.28 In fact it only took the Commonwealth 15 years after federation to introduce its own laws with respect to income taxation.
The Founders and the future of the Constitution
The drafters of the Constitution were leading political figures in the Australian colonies which were to become the States of Australia. They were drafting a document for government into an unknown future. They were guided by some of the finest legal minds of their day, including Samuel Griffith who became the first Chief Justice of the High Court, Edmund Barton first Prime Minister and, in 1903, a founding member of the High Court, Richard O'Connor also one of the three founding members of the High Court, and Alfred Deakin first Attorney-General of the Commonwealth. Isaac Isaacs, who was appointed to the High Court in 1906 and became Chief Justice in 1930 and thereafter first Australian-born Governor-General, was also among the delegates, as was Henry Bournes Higgins who was appointed to the High Court in 1906. Prominent in the early drafting of the Constitution and in the decision to model it in part upon the Constitution of the United States was Andrew Inglis Clark, the Attorney-General of Tasmania, and Charles Kingston, a lawyer who was Premier of South Australia. Another Premier of South Australia during the period of the Conventions was John Downer, a barrister and Queens Counsel.
The first working draft of the Constitution prepared by Andrew Inglis Clark informed much of the shape of the document that was eventually adopted. It drew heavily upon the Constitution of the United States, although its model of responsible government was taken from the United Kingdom. Sir Owen Dixon, addressing the American Bar Association in his capacity as Australian Ambassador in 1942, summarised the approach taken by the framers of the Constitution:
The men who drew up the Australian Constitution had the American document before them; they studied it with care; they even read the standard books of the day which undertook to expound it. They all lived, however, under a system of responsible government. That is to say, they knew and believed in the British system by which the Ministers are responsible to the Parliament and must go out of office whenever they lose the confidence of the legislature. They felt therefore impelled to make one great change in adapting the American Constitution. Deeply as they respected your institutions, they found themselves unable to accept the principle by which the executive government is made independent of the legislature. Responsible government, that is, the system by which the executive is responsible to the legislature, was therefore introduced with all its necessary consequences.29 Sir Samuel Griffith made substantial additions to Inglis Clark's draft, before sending the 'First proof of a Constitution Bill' to the government printer late on the night of 24 March 1891.30 Over the next six days, Griffith, Inglis Clark and Kingston continued to revise the text (although Inglis Clark's involvement was somewhat hampered by a bout of influenza). Three of those six days coincided with the Easter break, and Griffith decided that he and his colleagues would do well to continue their work during the break aboard his yacht, the Lucinda.31 On Tuesday, 31 March 1891, Griffith introduced to the Convention the first official draft of a Constitution for an Australian Federation.32 The men who drafted the Australian Constitution lived in a world very different from our own. The polities which they represented were self governing colonies of the United Kingdom. They were not creating a revolution against Imperial rule. There was no concern about the definition of human rights and freedoms of the kind to be found in the United States Constitution. They were constructing a constitution which would have to be accepted not only by the people of the Australian colonies but also by the United Kingdom Government and Parliament. They were constructing a constitution for a nation which at its beginnings would be in many respects a large self-governing colony whose governmental powers would be dependent for their legal authority upon a statute of the United Kingdom Parliament. They were drafting their constitution in a world in which it would have been difficult, if not impossible, to imagine or envisage the world of the late 20 and early 21thst century, in which Empire had vanished, in which international law and multilateral and bilateral conventions covered almost every topic with which government might be concerned, and in which technology had transformed the means by which trade, commerce, communication, travel and warfare would be conducted. They would have found it difficult, if not impossible, to imagine a world in which humanity seemed to be capable of destroying itself as a species and in which, for all its tensions and conflicts, there is an enhanced sense of the interdependence of nations and peoples in a global community. That they produced a working constitution which has supported a successful representative democracy through a century of change, which they could not have imagined, is a testament to their acuity and to their statesmanship. They knew that they were writing a document for the future. Sir John Downer QC, speaking at the 1898 Session of the Australasian Federal Convention held in Melbourne, looked to the judiciary of the future and said:
With them rests the obligation of finding out principles which are in the minds of this Convention in framing this Bill and applying them to cases which have never occurred before, and which are very little thought of by any of us.33 Andrew Inglis Clark, writing in 1901 about the interpretation of the Constitution through future generations, said:
it must be read and construed, not as containing a declaration of the will and intentions of men long since dead, and who cannot have anticipated the problems that would arise for solution by future generations, but as declaring the will and intentions of the present inheritors and possessors of sovereign power, who maintain the Constitution and have the power to alter it, and who are in the immediate presence of the problems to be solved. It is they who enforce the provisions of the Constitution and make a living force of that which would otherwise be a silent and lifeless document. Every community of men is governed by present possessors of sovereignty and not by the commands of men who have ceased to exist.34 In those words we hear the voice of a great Australian statesman speaking across the 112 years in which the Australian federation has existed. His 'living force' metaphor, which has perhaps too vitalist a flavour for contemporary tastes, other than those of Star Wars aficionados, did not exceed the constraints that the constitutional text imposes. Its language was to be interpreted 'consistently with a proper use of it as an intelligible vehicle of the conceptions and intentions of the human mind, and consistently with the historical associations from which particular words and phrases derive the whole of their meaning in juxtaposition with their context.'35