Pape v Federal Commissioner of Taxation

HIGH COURT OF AUSTRALIA

FRENCH CJ,
GUMMOW, HAYNE, HEYDON, CRENNAN, KIEFEL AND BELL JJ

BRYAN REGINALD PAPE  PLAINTIFF

AND

THE COMMISSIONER OF TAXATION OF THE
COMMONWEALTH OF AUSTRALIA AND ANOR                   DEFENDANTS

Pape v Commissioner of Taxation [2009] HCA 23
Date of order:  3 April 2009
Date of publication of reasons:  7 July 2009
S35/2009

ORDER

Order that the questions stated in the amended special case be answered as follows:

Question 1:Does the plaintiff have standing to seek the relief claimed in his writ of summons and statement of claim?

Answer:Yes.

Question 2:Is the Tax Bonus for Working Australians Act (No 2) 2009 (Cth) valid because it is supported by one or more express or implied heads of legislative power under the Commonwealth Constitution?

Answer:The Tax Bonus for Working Australians Act (No 2) 2009 is a valid law of the Commonwealth.

Question 3:Is payment of the tax bonus to which the plaintiff is entitled under the Tax Bonus for Working Australians Act (No 2) 2009 supported by a valid appropriation under ss 81 and 83 of the Constitution?

Answer:There is an appropriation of the Consolidated Revenue Fund within the meaning of the Constitution in respect of payments by the Commissioner required by s 7 of the Tax Bonus for Working Australians Act (No 2) 2009.

Question 4:Who should pay the costs of the special case?

Answer:In accordance with the agreement of the parties announced on the second day of the hearing of the special case, there is no order for costs.

Representation

B R Pape in person (instructed by Toomey Pegg Drevikovsky Lawyers)

S J Gageler SC, Solicitor-General of the Commonwealth with S B Lloyd SC and G M Aitken for the defendants (instructed by Australian Government Solicitor)

Interveners

R J Meadows QC, Solicitor-General for the State of Western Australia with C L Conley intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor for Western Australia)

M G Hinton QC, Solicitor-General for the State of South Australia with S A McDonald intervening on behalf of the Attorney-General for the State of South Australia (instructed by Crown Solicitor for the State of South Australia)

M J Leeming SC with J K Kirk intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor (NSW))

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Pape v Commissioner of Taxation

Constitutional law – Standing – Section 7 of the Tax Bonus for Working Australians Act(No 2) 2009 (Cth) ("the Act") provides that the Commissioner of Taxation must pay a tax bonus to entitled persons – Persons entitled under s 5 of Act if, inter alia, an individual, Australian resident with an adjusted tax liability greater than nil and not exceeding $100,000 for 2007-08 income tax year – Whether person entitled under s 5 of Act has standing to bring action for declarations and injunction.

Constitutional law – Appropriations of moneys from the Consolidated Revenue Fund – Whether payment of tax bonus supported by valid appropriation under ss 81 and 83 of Constitution – Whether appropriation "for the purposes of the Commonwealth" under s 81 – Whether phrase "for the purposes of the Commonwealth" limits legislative power – Whether source of legislative "power to spend" is ss 81 and 51(xxxix).

Constitutional law – Powers of the Commonwealth Parliament – Whether Act law with respect to trade and commerce under s 51(i) – Whether Act law with respect to taxation under s 51(ii) – Whether Act law with respect to external affairs under s 51(xxix) – Whether Act supported by implied nationhood power – Whether Act supported by power conferred by ss 81 and 51(xxxix) – Whether Act supported by power conferred by ss 61 and 51(xxxix) – If Act beyond power, whether Act can be read down so as to be within power.

Constitutional law – Executive power of the Commonwealth – Global financial and economic crisis – Whether Act supported by ss 61 and 51(xxxix).

Constitutional law – Taxation power – Persons entitled under s 5 of Act included persons entitled to tax bonus greater than their adjusted tax liability for the 2007‑08 financial year – Whether Act law with respect to taxation.

Words and phrases – "appropriation", "for the purposes of the Commonwealth", "made by law" and "maintenance of this Constitution".

Constitution, ss 51(i), (ii), (xxix), (xxxix), 61, 81 and 83.
Acts Interpretation Act 1901 (Cth), s 15A.
Tax Bonus for Working Australians Act (No 2) 2009 (Cth).
Taxation Administration Act 1953 (Cth), ss 2 and 16.

FRENCH CJ.

Introduction

1. On 4 February 2009, the Minister for Families, Housing, Community Services and Indigenous Affairs introduced into the House of Representatives the Tax Bonus for Working Australians Bill 2009.  The Minister said that the measure would provide, at a cost of $8.2 billion, financial support to about 8.7 million taxpayers.  This support was to take the form of one-off payments ranging from $950 to $300 according to the taxable income of the recipients in the year ended 30 June 2008.  Their stated purpose was to[1]:

   "immediately support jobs and strengthen the Australian economy during a severe global recession."

   [1]Australia, House of Representatives, Parliamentary Debates (Hansard), 4 February 2009 at 175.

2. The Bill was defeated in the Senate.  A fresh Bill in substantially the same terms save for the amounts of the payments was introduced into the House of Representatives on 12 February 2009 as the Tax Bonus for Working Australians Bill (No 2) 2009.  It provided for payments ranging from $900 to $250 for taxpayers earning between nil and $100,000 for the year ended 30 June 2008.  A Tax Bonus for Working Australians (Consequential Amendments) Bill (No 2) 2009 was introduced at the same time.

3. The Second Reading Speeches for the new Bills incorporated by reference the Second Reading Speeches for their predecessors[2].  The payments were said to be among five key one-off payments for lower and middle-income households and individuals[3].

   [2]Australia, House of Representatives, Parliamentary Debates (Hansard), 12 February 2009 at 1267.

   [3]The Household Stimulus Package Act (No 2) 2009 (Cth) provided for the "back to school bonus", the "single income family bonus", the "training and learning bonus" and the "farmers hardship bonus", primarily by amendments to the Social Security Act 1991 (Cth) and the A New Tax System (Family Assistance) Act 1999 (Cth).

4. Eligibility for the payments, according to entitlements defined by the legislation, was to be determined by the Commissioner of Taxation.  The bonus would be available from April 2009 to Australian resident taxpayers who had already had their tax returns assessed.  Taxpayers who had not yet lodged their returns would have their bonus paid following assessment of their returns by the Australian Taxation Office ("the ATO").

5. The Bills were enacted and assented to on 18 February 2009 as the Tax Bonus for Working Australians Act (No 2) 2009 (Cth) ("the Tax Bonus Act") and the Tax Bonus for Working Australians (Consequential Amendments) Act (No 2) 2009 (Cth) ("the Consequential Amendments Act").

6. On 26 February 2009, Bryan Reginald Pape, a person apparently entitled to receive $250 under the Tax Bonus Act, issued a writ out of the Sydney Registry of this Court against the Commissioner of Taxation claiming, inter alia, declarations that the Tax Bonus Act is invalid and that the tax bonus payable to him under that Act is "unlawful and void". He also sought an injunction restraining the making of the payment to him.

7. The Commonwealth was joined as a defendant to the action. The parties agreed to submit a Special Case pursuant to r 27.08 of the High Court Rules 2004, stating questions for the opinion of the Full Court. On 13 March 2009, Gummow J ordered that the Special Case be referred to the Full Court for hearing commencing on 30 March 2009. Notices under s 78B of the Judiciary Act 1903 (Cth) were issued on 17 March 2009 to the Attorneys-General of the States and Territories. The States of New South Wales, South Australia and Western Australia intervened. In my opinion, Mr Pape had standing to claim the relief he sought. I am also of the opinion that the Tax Bonus Act is valid and the tax bonus payable to Mr Pape is lawful. On 3 April 2009, I joined in the pronouncement of orders reflecting this conclusion by way of the answers then given to the questions stated in the Special Case.

8. I base my opinion as to validity upon the following propositions:

   1.The executive power of the Commonwealth conferred by s 61 of the Constitution extends to the power to expend public moneys for the purpose of avoiding or mitigating the large scale adverse effects of the circumstances affecting the national economy disclosed on the facts of this case, and which expenditure is on a scale and within a time-frame peculiarly within the capacity of the national government.

   2.The executive power so to expend public moneys is conditioned, by ss 81 and 83 of the Constitution, upon appropriation of the requisite moneys by an Act of the Parliament for that purpose.

   3.The appropriation necessary to authorise the proposed expenditure in this case was effected by s 16 of the Taxation Administration Act 1953 (Cth) ("the Taxation Administration Act") read with s 3 of the Tax Bonus Act.

   4.The legislative power to enact statutory provisions, beyond appropriation, to support the exercise of the executive power in this case is found in the incidental power conferred by s 51(xxxix) of the Constitution.

   5.The provisions of ss 81 and 83 do not confer a substantive "spending power" upon the Commonwealth Parliament. They provide for parliamentary control of public moneys and their expenditure. The relevant power to expend public moneys, being limited by s 81 to expenditure for "the purposes of the Commonwealth", must be found elsewhere in the Constitution or statutes made under it.

   6.It is not necessary in light of the preceding to consider the specific heads of power otherwise relied upon by the Commonwealth to support the Tax Bonus Act.

9. The implications of these propositions for the scope of the executive power generally are limited. The aspect of the power engaged in this case involves the expenditure of money to support a short-term national fiscal stimulus strategy calculated to offset the adverse effects of a global financial crisis on the national economy. The legislative measures defining the criteria of that expenditure and matters incidental to it were authorised by s 51(xxxix). The expenditure was necessarily conditioned upon a parliamentary appropriation, in legislative form, mandated by ss 81 and 83 of the Constitution. The constitutional support for expenditure for national purposes, by reference to the executive power, may arguably extend to a range of subject areas reflecting the established practice of the national government over many years, which may well have relied upon ss 81 and 83 of the Constitution as a source of substantive spending power. It is not necessary for present purposes to define the extent to which such expenditure, previously thought to have been supported by s 81, lies within the executive power.

10. Future questions about the application of the executive power to the control or regulation of conduct or activities under coercive laws, absent authority supplied by a statute made under some head of power other than s 51(xxxix) alone, are likely to be answered conservatively[4].  They are likely to be answered bearing in mind the cautionary words of Dixon J in the Communist Party Case[5]:

    "History and not only ancient history, shows that in countries where democratic institutions have been unconstitutionally superseded, it has been done not seldom by those holding the executive power.  Forms of government may need protection from dangers likely to arise from within the institutions to be protected."

    In that connection, and as appears below, the identification of a class of events or circumstances which might, under some general rubric such as "national concern" or "national emergency", enliven the executive power does not arise for consideration here.

    [4]See discussion of the authorities in Zines, The High Court and the Constitution, 5th ed (2008) at 414-415.

    [5]Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 187; [1951] HCA 5.

    The questions for determination

11. The Special Case stated the following questions for the opinion of the Full Court:

    1.Does the plaintiff have standing to seek the relief claimed in his writ of summons and statement of claim?

    2.Is the Tax Bonus Act valid because it is supported by one or more express or implied heads of legislative power under the Commonwealth Constitution?

    3.Is payment of the tax bonus to which the plaintiff is entitled under the Tax Bonus Act supported by a valid appropriation under ss 81 and 83 of the Constitution?

    4.Who should pay the costs of the Special Case?

    The Special Case proceeded in part on the basis of certain "agreed facts" incorporated in it by recitation and by documentary attachment.  It is necessary to consider the nature of those facts and their role in the decision in this case before turning to their detailed content.

    The nature of the agreed facts

12. The facts agreed in the Special Case fall into the following categories:

    (i)Statements of law or mixed law and fact. In particular the statement that Mr Pape is putatively entitled under the Tax Bonus Act to a payment of $250 and that his adjusted tax liability for the year ended 30 June 2008 was $25,951.92.

    (ii)The existence of certain economic conditions.

    (iii)Statements made by the Executive and by international bodies comprising the Group of 20 ("the G20"), the International Monetary Fund ("the IMF") and the Organisation for Economic Co-operation and Development ("the OECD").

    (iv)Decisions taken by the Executive.

13. Mr Pape contested the relevance of the factual matters.  He did not dispute their accuracy or that of the statements, attached to the Special Case, made by the Commonwealth Government, the G20, the IMF and the OECD.

    Organisations referred to in the agreed facts

14. In order to understand the agreed facts it is necessary to describe the international entities referred to in the attachments to the Special Case.  The G20, the IMF and the OECD may be explained briefly by reference to materials provided to the Court, without objection, during the hearing of the Special Case.

15. The G20, of which Australia is a member, comprises Finance Ministers and Central Bank Governors of industrialised and developing countries.  Meetings of the Ministers and Governors are usually preceded by two meetings of Deputies[6].

    [6]http://www.g20.org accessed 28 March 2009, provided to the Court by the Commonwealth at the hearing.

16. The IMF was established in 1945 pursuant to the Articles of Agreement of the International Monetary Fund, a treaty which entered into force for Australia on 5 August 1947.  The purposes of the IMF set out in Art I of the treaty include:

    "(i)To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.

    (ii)To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy."

    Members of the IMF assume, inter alia, obligations to collaborate with the IMF to promote exchange stability and maintain orderly exchange arrangements with other members and to avoid competitive exchange alterations[7].  Members also undertake not to impose restrictions on the making of payments and transfers for current international transactions without the approval of the IMF[8].

    [7]Articles of Agreement of the International Monetary Fund, Art IV, s 1.

    [8]Articles of Agreement of the International Monetary Fund, Art VIII, s 2(a).

17. Australia is also a party to the Convention on the Organisation for Economic Co-operation and Development made in Paris in 1960.  The Convention entered into force for Australia on 7 June 1971.  The Convention reconstituted what was formerly the Organisation for European Economic Co-operation as the OECD.  The aims of the OECD are set out in Art 1 of the Convention, including the promotion of policies designed:

    "(a)to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy;

    (b)to contribute to sound economic expansion in Member as well as non-member countries in the process of economic development; and

    (c)to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations."

    The members also agree that they will "co-operate closely and where appropriate take co-ordinated action"[9].

    [9]Convention on the Organisation for Economic Co-operation and Development, Art 3(c).

    Factual background

18. The following sets out salient features of the agreed facts, including those reflected in the attachments to the Special Case.

19. There have been rapid adverse changes in macroeconomic circumstances globally and in Australia in 2008 and 2009.  These are characterised in the agreed facts as a global financial and economic crisis.  No country's economy is expected to avoid its effects.  It has already involved the most severe and rapid deterioration in the global economy since the Great Depression.  It is the most significant economic crisis since the Second World War.  It involves sharp world-wide declines in growth, rises in unemployment, restricted access to credit and falling wealth.

20. The crisis has triggered a global recession.  This has caused a deterioration in the Australian economy with almost all of its sectors facing significant weakness over the forecast horizon.  Significantly weakened domestic growth and higher unemployment are forecast.

21. On 15 November 2008 the G20 held a Summit on Financial Markets and the World Economy in Washington DC and issued a declaration which referred to "serious challenges to the world economy and financial markets" and the determination of the members to enhance cooperation, to restore global growth and to achieve needed reforms in the world's financial systems.  The declaration included the following statement:

    "Against this background of deteriorating economic conditions worldwide, we agreed that a broader policy response is needed, based on closer macroeconomic cooperation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries.  As immediate steps to achieve these objectives, as well as to address longer-term challenges, we will:

    …

    *Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate, while maintaining a policy framework conducive to fiscal sustainability."

22. In December 2008 in an OECD publication entitled "OECD Economic Outlook" reference was made to fiscal stimulus packages.  The general observation was offered that in some countries the scope for the reduction in policy rates was limited.  In that unusual situation fiscal policy stimulus over and above the support provided through automatic stabilisers had an important role to play:

    "Fiscal stimulus packages, however, need to be evaluated on a case-by-case basis in those countries where room for budgetary manoeuvre exists.  It is vital that any discretionary action be timely and temporary and designed to ensure maximum effectiveness."

    Reference was made to the long-term nature of infrastructure investment and:

    "[a]lternatives, such as tax cuts or transfer payments aimed at credit-constrained, poorer households, might prove more effective in boosting demand."

23. Staff of the IMF prepared a note of a meeting of the Deputies of the Group of 20 held between 31 January and 1 February 2009 in London.  The note referred to the current downturn in the global economy and an "adverse feedback loop between the real and financial sectors".  The Executive Summary to the note stated:

    "More aggressive and concerted policy actions are urgently needed to resolve the crisis and establish a durable turnaround in global activity.  To be effective, policies need to be comprehensive and internationally coordinated to limit unintended cross-border effects.  Action is needed on two fronts – to restore financial sectors to health and to bolster demand to sustain a durable recovery in global activity."

24. The need to support demand was specifically referred to:

    "Macroeconomic policy stimulus will be critical to support demand while financial issues are addressed and to avoid a deep and prolonged recession.  With conventional monetary policy reaching its limits, central banks will need to explore alternative policy approaches with a focus on intervention to unlock key credit markets.  That said, with constraints on the effectiveness of monetary policy, fiscal policy must play a central role in supporting demand, while remaining consistent with medium-term sustainability.  A key feature of a fiscal stimulus program is that it should support demand for a prolonged period of time and be applied broadly across countries with policy space to minimize cross-border leakages."

25. The role of direct fiscal stimulus was also identified:

    "Fiscal policy is providing important support to the economy through a range of channels, including direct stimulus, automatic stabilizers and the use of public balance sheets to shore up the financial system.  While such support is critical to bolster aggregate demand and to limit the impact of the financial crisis on the real economy, it implies a significant deterioration in the fiscal accounts."

26. At the time of the Deputies' meeting, G20 countries had adopted or planned to adopt fiscal stimulus measures amounting on average to around ½% of GDP in 2008, 1½% of GDP in 2009 and about 1¼% of GDP in 2010.  There was considerable variation across G20 countries in the size and composition of stimulus packages.  Fiscal stimulus, to that time, had consisted of one-third revenue measures and two-thirds expenditure measures.  Revenue measures had focussed on cuts in personal income tax and indirect taxes such as VAT or excises.  Increased spending for infrastructure had been emphasised on the expenditure side.  Other expenditure measures included transfers to states or local governments, support for housing sectors and aid to small and medium enterprises.

27. Fiscal stimulus measures in G20 countries were expected to affect their growth in 2009 by the order of ½ to 1¼ percentage points.

28. A statement from an IMF-OECD-World Bank seminar convened in February 2009 included the following:

    "In parallel, there continues to be an urgent need for fiscal stimulus.  The size and composition of fiscal packages should be consistent with each country's fiscal space and institutional capacity.  The deepening of the downturn suggests the need for an increase in high-impact fiscal expenditures in the first half of 2009, with further support in the following quarters, by countries in a position to prudently undertake such spending.  At the same time, embedding stimulus packages in a credible medium-term strategy that safeguards fiscal sustainability will also increase their impact in the short term."

29. The Updated Economic and Fiscal Outlook ("the UEFO") published by the Treasurer and the Minister for Finance on 3 February 2009 referred to the deteriorating global economy and falling tax revenues.  The circumstances were described as "exceptional" and the conclusion offered that "fiscal policy must take a strong role in supporting the economy".  The paper described support for economic growth and jobs as "the immediate and overriding priority for fiscal policy".  The Ministers said that a $42 billion Nation Building and Jobs Plan would deliver a fiscal stimulus package of about 2% of GDP in 2008-09.

30. Elements of the proposed fiscal stimulus package were set out in the UEFO.  The element relevant to these proceedings was described:

    "The Government will provide $12.7 billion to deliver an immediate stimulus to the economy to support growth and jobs now before investment spending and lower interest rates take effect.  These measures include an $8.2 billion Tax Bonus for Working Australians, a $1.4 billion Single-income Family Bonus, a $20.4 million Farmer's Hardship Bonus, a $2.6 billion Back to School Bonus and a $511 million Training and Learning Bonus.  These bonuses will be paid from early March."

    The Ministers referred to statements by international financial institutions about the necessity for domestic fiscal stimulus.  The decisions taken by the Commonwealth Government by way of response to the macroeconomic circumstances included:

    (i)To create three substantial fiscal stimulus packages and a range of other interventions in financial markets, including a deposit and wholesale funding guarantee.  The fiscal stimulus packages are the Economic Security Strategy, announced 14 October 2008, the Nation Building Package announced 12 December 2008 and the Nation Building and Jobs Plan announced in the UEFO on 3 February 2009;

    (ii)To provide an $8.2 billion tax bonus for working Australians, which was reduced to $7.7 billion as a result of the legislative process.

31. A copy of a joint media release by the Prime Minister and the Treasurer on 3 February 2009 in relation to the Nation Building and Jobs Plan was set out as an annexure to the Special Case.  The press release said, inter alia:

    "Targeted bonuses to low and middle income households will provide an immediate stimulus to the economy and support Australian jobs.

    In conjunction with the payments delivered as part of the $10.4 billion Economic Security Strategy announced in October, these measures have been designed to assist those groups most affected by the flow-on effects of the global recession."

32. The Special Case annexed a minute of the ATO relating to the implications of delaying the tax bonus as a result of these proceedings.  The minute referred to:

    "an extremely tight implementation schedule in order to ensure that as many tax bonus payments as possible are distributed in the last quarter of the financial year in line with the objectives of the Government's fiscal stimulus strategy."

    Distribution of the payments was planned to begin in the week commencing 6 April 2009 with some 80% of the payments being made over the following four weeks.  A smaller wave of distributions was to be made in May and June.

33. The objective of the Commonwealth Government was that payments of the tax bonus be made as soon as possible on the basis that the earlier the stimulus was delivered the more effective it would be.

    The statutory framework

34. The Tax Bonus Act commenced on the day on which it received the Royal Assent[10]. Section 3 of the Act provides:

    "The Commissioner has the general administration of this Act."

    This provision makes the Tax Bonus Act a "taxation law" within the meaning of s 995-1(1) of the Income Tax Assessment Act 1997 (Cth).  The term "taxation law" is there defined, inter alia, as:

    "an Act of which the Commissioner has the general administration".

    [10]Tax Bonus Act, s 2.

35. Section 5 of the Tax Bonus Act creates the entitlement to a tax bonus payment:

    "Entitlement to tax bonus

    (1)A person is entitled to a payment (known as the tax bonus) for the 2007-08 income year if:

    (a)the person is an individual; and

    (b)the person is an Australian resident for that income year; and

    (c)the person's adjusted tax liability for that income year is greater than nil; and

    (d)the person's taxable income for that income year does not exceed $100,000; and

    (e)the person lodges his or her income tax return for that income year no later than:

    (i)unless subparagraph (ii) applies – 30 June 2009; or

    (ii)if, before the commencement of this Act, the Commissioner deferred the time for lodgment of the return under section 388-55 in Schedule 1 to the Taxation Administration Act 1953 to a day later than 30 June 2009 – that later day.

    Exception for persons aged under 18 without employment income etc.

    (2)However, the person is not entitled to the tax bonus for the 2007-08 income year if:

    (a)he or she is a prescribed person in relation to that income year and is not an excepted person in relation to that income year; and

    (b)his or her assessable income for the income year does not include excepted assessable income."

    The term "prescribed person" is defined in s 4 as having the same meaning as in s 102AC of the Income Tax Assessment Act 1936 (Cth). An "excepted person" is also defined by reference to s 102AC[11].

    [11]In s 102AC, "prescribed person" refers to a person aged less than 18 years at the end of a given income year who is not an excepted person. An "excepted person" is a minor who is engaged in a full-time occupation, or who receives certain allowances or pensions, or who suffers from certain types of disability.

36. Section 6 sets out the amounts of the tax bonus payable to persons entitled to it for the 2007-08 income year. The amounts are:

    "(a)if the person's taxable income for that income year does not exceed $80,000 – $900; or

    (b)if the person's taxable income for that income year exceeds $80,000 but does not exceed $90,000 – $600; or  

    (c)if the person's taxable income for that income year exceeds $90,000 but does not exceed $100,000 – $250."

37. The obligation to pay the tax bonus is imposed on the Commissioner by s 7, which provides, inter alia:

    "(1)If the Commissioner is satisfied that a person is entitled to the tax bonus for the 2007-08 income year, the Commissioner must pay the person his or her tax bonus as soon as practicable after becoming so satisfied."

38. It was submitted by the Solicitor-General of the Commonwealth that the entitlement created by s 5 did not give rise to a right of recovery by the person entitled to the tax bonus. It was the Commissioner's duty to pay under s 7 which would be enforceable by mandamus. In my opinion, however, a right of recovery would lie on the basis of the Commissioner's duty. And where, as in this case, the debt is liquidated an action in debt would lie[12].

    [12]The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 at 313 [65] per McHugh and Gummow JJ; [1998] HCA 20, citing Mallinson v Scottish Australian Investment Co Ltd (1920) 28 CLR 66 at 70; [1920] HCA 51 and Shepherd v Hills (1855) 11 Ex 55 at 67 [156 ER 743 at 747].

39. Section 8 makes provision for recovery of overpayments in the event that a tax bonus is paid to a person not entitled to it or in the event that a person is paid more than the correct amount of his or her tax bonus.  There is a general interest charge applicable by virtue of s 9 in the event that a person liable to repay an amount does not do so within the required time.

40. The Commonwealth[13] relied upon s 16 of the Taxation Administration Act as the provision effecting the appropriations necessary under ss 81 and 83 of the Constitution to authorise the payment of the bonuses. Section 16 provides, inter alia:

    [13]Reference in these reasons to submissions by the Commonwealth refers to the common submissions put by the Commonwealth and the Commissioner.

    "(1)Where the Commissioner is required or permitted to pay an amount to a person by or under a provision of a taxation law other than:

    (a)a general administration provision; or

    (b)a provision prescribed for the purposes of this paragraph;

    the amount is payable out of the Consolidated Revenue Fund, which is appropriated accordingly.

    …

    (3)In this section, general administration provision means a provision of a taxation law that provides that the Commissioner has the general administration of the taxation law."

41. The Explanatory Memorandum which accompanied the Bills for the Tax Bonus Act and the Consequential Amendments Act, under the heading "Context of the Bills", stated:

    "1.3These Bills give effect to the Government's Nation Building and Jobs Plan announced on 3 February 2009.  The plan was introduced to assist the Australian people deal with the most significant economic crisis since the Second World War and provide immediate economic stimulus to boost demand and support jobs.  This measure, at a cost of $7.7 billion, provides financial support to around 8.7 million taxpayers."

    The constitutional framework

42. Provisions of the Constitution central to the arguments advanced for and against validity were:

    (a) Paragraphs of s 51 conferring express legislative power on the Parliament with respect to:

    "(i)trade and commerce with other countries, and among the States;

    (ii)taxation; but so as not to discriminate between States or parts of States;

    …

    (xxix)external affairs;

    …

    (xxxix)matters incidental to the execution of any power vested by this Constitution in the Parliament or in either House thereof, or in the Government of the Commonwealth, or in the Federal Judicature, or in any department or officer of the Commonwealth."

    (b)The executive power of the Commonwealth conferred by s 61 of the Constitution:

    "The executive power of the Commonwealth is vested in the Queen and is exercisable by the Governor-General as the Queen's representative, and extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth."

    (c)Section 81 which directs government revenues into a Consolidated Revenue Fund subject to appropriation in the following terms:

    "All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution."

    (d) Section 83 which provides:

    "No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.

    But until the expiration of one month after the first meeting of the Parliament the Governor-General in Council may draw from the Treasury and expend such moneys as may be necessary for the maintenance of any department transferred to the Commonwealth and for the holding of the first elections for the Parliament."

43. The Commonwealth seeks to support the validity of the provisions of the Tax Bonus Act by reference to the following broad propositions:

    1.The Tax Bonus Act read with s 16 of the Taxation Administration Act is supported by ss 81 and 51(xxxix) of the Constitution.

    2.In the alternative the Tax Bonus Act is supported by legislative powers identified as:

    (i) Section 51(xxxix) of the Constitution read with ss 61, 81 and 83.

    (ii) The Trade and Commerce Power – Constitution, s 51(i).

    (iii) The External Affairs Power – Constitution, s 51(xxix).

    (iv) The Taxation Power – Constitution, s 51(ii).

    Jurisdiction

44. The jurisdiction of this Court to entertain the application is derived from s 30 of the Judiciary Act which confers upon the Court original jurisdiction:

    "(a)in all matters arising under the Constitution or involving its interpretation".

    That statutory jurisdiction is conferred pursuant to the authority given to the Parliament by s 76(i) of the Constitution.

    The plaintiff's standing

45. The Commonwealth accepted that Mr Pape had a sufficient interest and therefore standing to seek a declaration that the tax bonus payable to him is unlawful and void. However, it maintained that he did not have standing to seek a declaration that the Tax Bonus Act is invalid. In particular, it was submitted, he could not argue that the Tax Bonus Act was invalid in its application to persons who would receive a tax bonus of a greater amount than the tax that they paid given that he himself will not be in that class of persons.

46. The submission was an unattractive one. It assumed that if Mr Pape were to succeed in establishing that the payment to him was unauthorised because the Tax Bonus Act was beyond power, there would be no consequence beyond his entitlement. It is difficult to imagine how the Commonwealth, faced with a finding by this Court that the Tax Bonus Act is invalid, could confine the application of that finding to Mr Pape and disregard it in its application to the remainder of those purportedly entitled under the Act. A declaration of invalidity of the Act would reflect the resolution of a question forming part of the matter in respect of which Mr Pape has invoked this Court's jurisdiction. Existing authorities as to standing in constitutional litigation would not prevent Mr Pape from obtaining the declaration he seeks as to the invalidity of the Act.

47. There is a long history of judicial caution in relation to the standing of private individuals to challenge the validity of statutes absent some particular or special interest to be advanced by such challenge.  The Supreme Court of the United States described the relation of taxpayer to federal government as "shared with millions of others" and "comparatively minute and indeterminable"[14].  The resolution of the standing issue in that case was related to the availability of equitable relief[15] and limiting considerations flowing from the separation of legislative and judicial powers[16].  The decision was referred to and relied upon in Australia in the formulation of a "private or special interest" test for standing[17].

    [14]Massachusetts v Mellon 262 US 447 at 487 (1923).

    [15]262 US 447 at 487 (1923).

    [16]262 US 447 at 488 (1923).

    [17]Anderson v The Commonwealth (1932) 47 CLR 50 at 52; [1932] HCA 2.

48. Earlier decisions of the Court have left some doubt about the standing of taxpayers to challenge taxing legislation.  Absent exposure to a specific liability or obligation, taxpayers have been thought to lack the interest needed to support a challenge to the validity of the legislation[18].

    [18]Fishwick v Cleland (1960) 106 CLR 186; [1960] HCA 55 and Logan Downs Pty Ltd v Federal Commissioner of Taxation (1965) 112 CLR 177; [1965] HCA 16.

49. Private challenges to spending arrangements have also encountered standing difficulties.  In the AAP Case[19], Mason J observed that the activity there under challenge created no cause of action in the individual citizen and that the individual taxpayer would have no interest at all in funds standing to the credit of the Consolidated Revenue Fund[20].  Similarly, in Attorney-General (Vict); Ex rel Black v The Commonwealth[21], Gibbs J did not think that plaintiffs who were taxpayers and parents of children at government schools had a sufficiently "special interest in the subject matter" of an action to challenge the validity of grants made under s 96 for the purposes of funding church schools[22].  His Honour referred to an exception which appeared to have been recognised for constitutional cases by the Supreme Court of Canada in Thorson v Attorney-General of Canada[23].  He expressed no concluded opinion on that exception[24].

    [19]Victoria v The Commonwealth and Hayden (1975) 134 CLR 338; [1975] HCA 52.

    [20](1975) 134 CLR 338 at 402.

    [21](1981) 146 CLR 559; [1981] HCA 2.

    [22](1981) 146 CLR 559 at 589.

    [23][1975] 1 SCR 138.

    [24](1981) 146 CLR 559 at 589-590.

50. The question of standing is not readily detached from that of jurisdiction where the jurisdiction is federal.  In Croome v Tasmania[25], Gaudron, McHugh and Gummow JJ pointed to the conceptual awkwardness, if not impossibility, of the attempted severance between questions going to the standing of the plaintiffs and those directed to the constitutional requirement that federal jurisdiction be exercised with respect to a "matter"[26].  Their Honours said[27]:

    "Where the issue is whether federal jurisdiction has been invoked with respect to a 'matter', questions of 'standing' are subsumed within that issue. The submission made in the present case, to the effect that a proceeding in which a citizen seeks a declaration of invalidity of a law of a State, by reason of the operation of the Constitution, is liable to be struck out unless there is attempted enforcement of the State law against the citizen, indicates the interdependence of the notions of 'standing' and of 'matter'."

    [25](1997) 191 CLR 119; [1997] HCA 5.

    [26](1997) 191 CLR 119 at 132.

    [27](1997) 191 CLR 119 at 132-133.

51. The interdependence of jurisdiction and standing was revisited in Bateman's Bay Local Aboriginal Land Council v Aboriginal Community Benefit Fund Pty Ltd[28]:

    "[I]n federal jurisdiction, questions of 'standing', when they arise, are subsumed within the constitutional requirement of a 'matter'.  This emphasises the general consideration that the principles by which standing is assessed are concerned to 'mark out the boundaries of judicial power' whether in federal jurisdiction or otherwise."  (footnotes omitted)

    [28](1998) 194 CLR 247 at 262 [37] per Gaudron, Gummow and Kirby JJ; [1998] HCA 49.

52. Mr Pape's standing was conceded in relation to his challenge to the lawfulness of the payment to be made to him under the Tax Bonus Act. That concession concludes the question of his standing for the purpose of the relief he claimed. It was a necessary part of the disposition of the matter before the Court that it determine whether the Tax Bonus Act was valid. Declaratory relief which Mr Pape sought would reflect, were he to succeed, findings made by the Court leading to the conclusion that he was not entitled to the tax bonus payment. He would be entitled to a declaration of invalidity in relation to the Act reflecting that conclusion. There is no basis for the contention that he lacks standing to seek declaratory relief in relation to the validity of the Tax Bonus Act.

53. It is necessary now to consider the so-called "appropriations power", which has been called "the spending power"[29], under ss 81 and 83 of the Constitution. Having regard to their text, their historical antecedents in the history of responsible government and their development at the Conventions of the 1890s, these provisions are better seen as parliamentary controls of the exercise of executive power to expend public moneys than as a substantive source of such power. It follows that the "purposes of the Commonwealth", for which appropriation may be authorised, are to be found in the provisions of the Constitution and statutes made under it which, subject to appropriation, confer substantive power to expend public moneys.

    [29]For example, see Saunders, "The Development of the Commonwealth Spending Power", (1978) 11 Melbourne University Law Review 369.

    Appropriation and responsible government – historical background

54. Parliamentary control of executive expenditure of public funds had its origins in 17th century England. Quick and Garran, in their commentary on s 53 of the Constitution, referred to the resolution of the House of Commons on 3 June 1678[30]:

    "That all aids and supplies, and aids to His Majesty in Parliament, are the sole gift of the Commons; and all bills for the granting of any such aids and supplies ought to begin with the Commons; and that it is the undoubted and sole right of the Commons to direct, limit, and appoint in such bills the ends, purposes, considerations, conditions, limitations, and qualifications of such grants, which ought not to be changed or altered by the House of Lords."

    Although the resolution was concerned with the relationship between the House of Commons and the House of Lords, it also reflected the assertion by the House of Commons of control as against the Executive of the expenditure of public moneys.

    [30]Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 667.

55. The needs of government before the Revolution of 1688 were "principally supplied by various ordinary lucrative prerogatives inherent in the Crown, and which had existed time out of mind"[31].  After the Revolution the public revenue of the Crown was[32]:

    "dependent upon Parliament, and … derived either from annual grants for specific public services, or from payments already secured and appropriated by Acts of Parliament, and which are commonly known as charges upon the Consolidated Fund".

    [31]Chitty, A Treatise on the Law of the Prerogatives of the Crown, (1820) at 200.

    [32]Erskine May, A Treatise on the Law, Privileges, Proceedings and Usage of Parliament, 10th ed (1893) at 554.

56. The Bill of Rights 1689 provided, inter alia:

    "That levying money for or to the use of the Crown by pretence of prerogative, without grant of Parliament, for longer time, or in other manner than the same is or shall be granted, is illegal."

57. The concept of a Consolidated Revenue Fund dates back to the 18th century.  Before its emergence particular taxes were assigned to particular items of expenditure.  There was some movement to partial consolidation.  Blackstone wrote of a history of distinct funds set up to receive the products of various taxes and the reduction of the number of those funds to three[33].  In 1787 a Consolidated Fund was established by statute[34] "into which shall flow every stream of the public revenue, and from whence shall issue the supply for every public service"[35].  Drafts made upon the Consolidated Fund were based upon resolutions of a parliamentary ways and means committee.  The resolutions were the basis for[36]:

    "sessional Consolidated Fund Acts, and finally the Appropriation Act, which endows those resolutions with complete legal effect; and upon receipt of the order from the sovereign, which gives final validity to a supply grant, the treasury makes the issues to meet those grants out of the Consolidated Fund."

    [33]Blackstone, Commentaries on the Laws of England, (1765), bk 1, ch 8 at 318.

    [34]27 Geo III, c 13.

    [35]Erskine May, A Treatise on the Law, Privileges, Proceedings and Usage of Parliament, 10th ed (1893) at 558.

    [36]Erskine May, A Treatise on the Law, Privileges, Proceedings and Usage of Parliament, 10th ed (1893) at 558.

58. The right of supreme control over taxation with the correlative right to control expenditure was regarded as the "most ancient, as well as the most valued, prerogative of the House of Commons"[37].  The prohibition upon raising taxes without parliamentary authority would be nugatory if the proceeds, even of legal taxes, could be expended at the will of the sovereign[38].  The principle that the Executive draws money from Consolidated Revenue only upon statutory authority is central to the idea of responsible government.

    [37]Durell, The Principles and Practice of the System of Control over Parliamentary Grants, (1917) at 3 citing Todd, Parliamentary Government in England, (1892), vol 2 at 196.

    [38]Durell, The Principles and Practice of the System of Control over Parliamentary Grants, (1917) at 3.

59. The principle of parliamentary control of public expenditure was recognised by the Privy Council in Auckland Harbour Board v The King[39].  Viscount Haldane said[40]:

    "For it has been a principle of the British Constitution now for more than two centuries … that no money can be taken out of the consolidated Fund into which the revenues of the State have been paid, excepting under a distinct authorization from Parliament itself.  The days are long gone by in which the Crown, or its servants, apart from Parliament, could give such an authorization or ratify an improper payment.  Any payment out of the consolidated fund made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced."

    [39][1924] AC 318.

    [40][1924] AC 318 at 326-327.

60. Emerging from the Bill of Rights 1689 and the common law in England were what have been described as "three fundamental constitutional principles" supporting parliamentary control of finance[41]:

    (i)The imposition of taxation must be authorised by Parliament.

    (ii)All Crown revenue forms part of the Consolidated Revenue Fund.

    (iii)Only Parliament can authorise the appropriation of money from the Consolidated Revenue Fund.

    These principles were imported into the Australian colonies upon their achievement of responsible government.  A Consolidated Revenue Fund was established for each of them.  The principles operate today in all States and Territories, albeit they are not expressly referred to in all of their Constitutions[42].  They are central to the system of responsible ministerial government which "prior to the establishment of the Commonwealth of Australia in 1901 … had become one of the central characteristics of our polity"[43].

    [41]Carney, The Constitutional Systems of the Australian States and Territories, (2006) at 86.

    [42]For more specific references see:  Australian Capital Territory (Self-Government) Act 1988 (Cth), s 58(1); Constitution Act 1902 (NSW), s 39(1); Northern Territory (Self-Government) Act 1978 (Cth), s 45(1); Constitution of Queensland 2001 (Q), ss 64-66; Constitution Act 1934 (SA), ss 60, 73B; Constitution Act 1934 (Tas), s 36; Constitution Act 1975 (Vic), ss 62-65, 89-93; Constitution Act 1889 (WA), ss 64-68.

    [43]Victorian Stevedoring and General Contracting Co Pty Ltd and Meakes v Dignan (1931) 46 CLR 73 at 114; [1931] HCA 34 quoted with approval in Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 558; [1997] HCA 25. For reference to the historical roots of ss 81 and 83 in British constitutional law and practice see also Northern Suburbs General Cemetery Reserve Trust v The Commonwealth (1993) 176 CLR 555 at 575 per Mason CJ, Deane, Toohey and Gaudron JJ, 580 per Brennan J, 591 per Dawson J, 597-598 per McHugh J; [1993] HCA 12.

61. The Executive in English and Australian constitutional history has on occasions expended public moneys without prior parliamentary appropriation[44].  Professor Keith wrote in 1933[45]:

    "The practice is far from rare, but in some cases it has been mitigated by legislation which permits expenditure either of sums up to a fixed amount or sums based on the expenditure authorised for the previous year pending Parliamentary sanction …  The Governor-General's position in these matters is governed by the consideration that he cannot, unless in a very flagrant case of illegality, refuse to accept the assurance of ministers that funds must be provided to carry on the administration."

    In the context of executive agreements involving commitments to expenditure, but not involving actual expenditure, he accepted that ministers could act and obtain an appropriation later on and described as "very dubious" the suggestion in Colonial Ammunition Co that a commitment by the Executive not previously authorised by the Parliament could not be put right by a subsequent appropriation[46].

    [44]Campbell, "Parliamentary Appropriations", (1971) 4 Adelaide Law Review 145 at 150, citing instances dating back to 1860 in England and 1868 in New South Wales.  As to the various devices used to circumvent the appropriation requirement in Victoria and New South Wales in the 1860s and 1870s see Waugh, "Evading Parliamentary Control of Government Spending:  Some Early Case Studies", (1998) 9 Public Law Review 28.

    [45]Keith, The Constitutional Law of the British Dominions, (1933) at 244.

    [46]Keith, The Constitutional Law of the British Dominions, (1933) at 245, citing The Commonwealth v Colonial Ammunition Co Ltd (1924) 34 CLR 198; [1924] HCA 5.

62. In New South Wales v Bardolph[47], this Court upheld the validity of a contractual obligation undertaken by the Government of New South Wales without the benefit of a current parliamentary appropriation.  Dixon J said[48]:

    "It is a function of the Executive, not of Parliament, to make contracts on behalf of the Crown.  The Crown's advisers are answerable politically to Parliament for their acts in making contracts.  Parliament is considered to retain the power of enforcing the responsibility of the Administration by means of its control over the expenditure of public moneys.  But the principles of responsible government do not disable the Executive from acting without the prior approval of Parliament, nor from contracting for the expenditure of moneys conditionally upon appropriation by Parliament and doing so before funds to answer the expenditure have actually been made legally available."

    He also said, however, that "all obligations to pay money undertaken by the Crown are subject to the implied condition that the funds necessary to satisfy the obligation shall be appropriated by Parliament"[49]. This did not qualify the legal requirements of s 83. As Brennan J in Northern Suburbs General Cemetery Reserve Trust v The Commonwealth said[50]:

    "The actual withdrawal of money from the CRF requires a prior valid appropriation."

    In Australian Woollen Mills Pty Ltd v The Commonwealth[51] the Court, relying upon Bardolph, regarded it as "well settled" that judgment may be given against the Crown on a contract although that judgment cannot be enforced in the absence of provision of funds by an Act of Parliament[52].

    [47](1934) 52 CLR 455.

    [48](1934) 52 CLR 455 at 509. See also at 498 per Rich J, 502 per Starke J, 523 per McTiernan J.

    [49](1934) 52 CLR 455 at 508 citing New South Wales v The Commonwealth [No 1] (1932) 46 CLR 155 at 176; [1932] HCA 7.

    [50](1993) 176 CLR 555 at 581.

    [51](1954) 92 CLR 424; [1954] HCA 20.

    [52](1954) 92 CLR 424 at 455. See also Vass v Commonwealth (2000) 96 FCR 272 at 287-288 [24]-[25] and generally Seddon, "The Interaction of Contract and Executive Power", (2003) 31 Federal Law Review 541.

63. The phenomenon of the so-called standing appropriation may be linked to the practical exigencies that in the past gave rise to expenditure without prior parliamentary authority.  It is useful briefly to mention the two classes of appropriation made as a matter of practice.

64. Appropriations fall into two classes, annual and special (or standing) appropriations.  The annual appropriations comprise the budget.  The standing appropriations are permanent and provide for appropriation from time to time.  They were described by Quick and Garran as "payments which it is not desirable to make subject to the annual vote of Parliament"[53].  Stawell CJ characterised them as "a voluntary surrender by Parliament of what is supposed to be its most important power"[54].

    [53]Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 814.

    [54]Alcock v Fergie (1867) 4 W W & A'B (L) 285 at 319.

65. The Senate Standing Committee on Finance and Public Administration reported in 2007 that the great majority of Commonwealth funds are now provided by means of special appropriations.  In 2002-03 they represented more than 80% of all appropriations drawings for the year[55].  Professor Lindell in a submission to the Committee described "the modern reality … that Parliament is gradually losing control over the expenditure of public funds.  Appropriations are increasingly permanent rather than annual and they are also framed in exceedingly broad terms"[56].

    [55]Australia, Senate, Standing Committee on Finance and Public Administration, Transparency and Accountability of Commonwealth Public Funding and Expenditure, March 2007 at 15.

    [56]Australia, Senate, Standing Committee on Finance and Public Administration, Transparency and Accountability of Commonwealth Public Funding and Expenditure, March 2007 at 15; see also the discussion in Lawson, "Re-Invigorating the Accountability and Transparency of the Australian Government's Expenditure", (2008) 32 Melbourne University Law Review 879, particularly at 916 and 921.

66. The history of executive and parliamentary practice does not suggest any legal qualification in existence at the time of federation, or subsequently under the Constitution, of the well established proposition, reflected in the law of Great Britain and its colonies, that parliamentary appropriation conditions the lawfulness of executive expenditure[57].

    [57]Campbell, "Parliamentary Appropriations", (1971) 4 Adelaide Law Review 145 at 150 and see Australian Alliance Assurance Co Ltd v John Goodwyn, the Insurance Commissioner [1916] St R Qd 225 at 252-253 per Lukin J.

67. It is not submitted in the present case that there is any basis upon which the executive power of the Commonwealth would extend to the expenditure of public moneys without parliamentary appropriation[58].  It was the Commonwealth's contention that the requisite appropriation had been made.

    [58]As to other provisions of the Constitution which may authorise expenditure directly see Lawson, "Re-Invigorating the Accountability and Transparency of the Australian Government's Expenditure", (2008) 32 Melbourne University Law Review 879 at 895 fn 135.

    Appropriation in the Convention Debates

68. The 1891 draft Bill for the Constitution contained two provisions directly material to appropriations. They appeared in Ch IV of the draft entitled "Finance and Trade". Clause 1 of Ch IV provided, in language foreshadowing that of s 81:

    "All duties, revenues, and moneys, raised or received by the Executive Government of the Commonwealth, under the authority of this Constitution, shall form one Consolidated Revenue Fund, to be appropriated for the Public Service of the Commonwealth in the manner and subject to the charges provided by this Constitution."

    Clause 3 provided:

    "No money shall be drawn from the Treasury of the Commonwealth except under appropriations made by law."

    This limitation set out the terms of what was to become the first sentence in s 83.

69. Clause 1 was not discussed at the 1891 Sydney Convention.  Clause 3 was discussed and agreed to.  In the course of debate an amendment was proposed to cl 3 which would have added the words "and for purposes authorised by this Constitution"[59]. Mr Thynne, who proposed the amendment, had originally intended to incorporate it in the precursor of s 51 with a view to "restricting the powers of the federal parliament for the appropriation of money absolutely to the purposes authorised by this constitution". He withdrew the amendment at the suggestion of Sir Samuel Griffith with a view to introducing it into cl 3.

    [59]Official Record of the Debates of the Australasian Federal Convention, (Sydney), 7 April 1891 at 788-789.

70. The amendment was opposed and defeated.  Sir Samuel Griffith commented that the words in cl 1 already contained "all the limitations we can really insert, however many words we may use to express them"[60].

    [60]Official Record of the Debates of the Australasian Federal Convention, (Sydney), 7 April 1891 at 789.

71. Clause 79 of the draft Bill considered by the 1897 Adelaide Convention was in the same terms as cl 1 of Ch IV of the 1891 draft Bill.  It was amended to omit the words "duties" and "moneys"[61].  The object of the amendment was to prevent loan moneys being taken into the revenue for the purposes of the Commonwealth.  However, later in the drafting process, the word "moneys" was brought back.  While Quick and Garran were unable to point to any reason for its reinsertion, they pointed out that it was the "universal constitutional practice, not only of Great Britain, but of all the British colonies, to keep loan funds distinct from revenue funds" and that there was no intention evidenced at the Convention of departing from that established usage[62].

    [61]Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 19 April 1897 at 835.

    [62]Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 811.

72. Proposed cl 81 of the 1897 draft, corresponding to cl 3 of Ch IV of the 1891 draft, read:

    "No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law and by warrant countersigned by the Chief Officer of Audit of the Commonwealth."

    The clause was agreed to in that form[63].

    [63]Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 19 April 1897 at 835.

73. By the close of the 1897 Adelaide Convention, cl 79 of the draft there considered had been renumbered as cl 81. That clause became s 81 of the Constitution. An amendment proposed in Melbourne in 1898 to add back the word "moneys" after "revenues" was unsuccessful[64].

    [64]Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 14 February 1898 at 900.

74. Clause 81 of the draft Bill considered in 1897 became cl 83 of the 1898 draft Bill. It foreshadowed s 83 of the Constitution. It was agreed to at the 1898 Melbourne Convention with two amendments. The first omitted the words "and by warrant countersigned by the Chief Officer of Audit of the Commonwealth"[65]. The second amendment foreshadowed the second paragraph of s 83 as set out in the Constitution. That amendment was itself further amended on the motion of Edmund Barton and the clause agreed to in its present form[66].

    [65]Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 14 February 1898 at 901-907.  Note:  a printing error on p 907 incorrectly indicates that the amendment was negatived.

    [66]Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 4 March 1898 at 1899.

75. An amendment to cl 81, substituting the words "Public Service" with the word "purposes", was prepared by the Drafting Committee and ordered to be embodied in the draft Bill pro forma and printed on 1 March 1898[67].  Dixon J referred to the change in the Pharmaceutical Benefits Case when saying of s 81[68]:

    "it is a provision in common constitutional form substituting for the usual words 'public service' the word 'purposes' of the Commonwealth only because they are more appropriate in a Federal form of government".

    Notwithstanding the submission on behalf of the Attorney-General of New South Wales to the contrary, the words "purposes of the Commonwealth" must be given their full amplitude and not read down on the assumption that they are simply another way of saying "public service".

    [67]Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 1 March 1898 at 1721.

    [68]Attorney-General (Vict) v The Commonwealth (1945) 71 CLR 237 at 271; [1945] HCA 30.

76. The terms of ss 81 and 83 have been contrasted in this Court with the equivalent provisions in the Constitution of the United States, which were known to the framers of the Commonwealth Constitution. Article I, §8, cl 1 of the United States Constitution confers upon the Congress the power:

    "To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States".

    Article I, §9, cl 7 provides:

    "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law …"

77. There is nothing in the consideration at the Convention Debates, of what became ss 81 and 83 of the Constitution, to suggest that they were intended as other than parliamentary controls of public funds and of executive expenditure in accordance with established principles of responsible government. As Professor Harrison Moore wrote in 1910, the Constitution in ss 81 and 83 "adopts the results of English and Colonial experience"[69].

    [69]Harrison Moore, The Constitution of The Commonwealth of Australia, 2nd ed (1910) at 522.

78. This experience was reflected in the observation of Griffith CJ in the Surplus Revenue Case[70]:

    "The appropriation of public revenue is, in form, a grant to the Sovereign, and the Appropriation Acts operate as an authority to the Treasurer to make the specified disbursements. A contractual obligation may or may not be added by some statutory provision or by authorized agreement, but it does not arise from the appropriation. The Appropriation Act does, however, operate as a provisional setting apart or diversion from the Consolidated Revenue Fund of the sum appropriated by the Act."

    [70]The State of New South Wales v The Commonwealth (1908) 7 CLR 179 at 190-191; [1908] HCA 68.

79. In similar vein, Isaacs J remarked[71]:

    "'Appropriation of money to a Commonwealth purpose' means legally segregating it from the general mass of the Consolidated Fund and dedicating it to the execution of some purpose which either the Constitution has itself declared, or Parliament has lawfully determined, shall be carried out."

    [71](1908) 7 CLR 179 at 200.

80. In his judgment in the Wool Tops Case[72], Isaacs J relied upon the British constitutional history.  The Court there held that the Executive of the Commonwealth had no power, absent parliamentary authorisation, to enter into agreements involving the exaction of fees or the payment of public moneys.  Some of the reasoning has been overtaken by later cases about the scope of the executive power[73].  Relevantly to parliamentary control of taxation and expenditure, Isaacs J said[74]:

    "For centuries under responsible government, as any history will tell us, the insistence of the House of Commons on control of taxation was the basis of popular liberty.  That alone, however, would have been of little use but for the accompanying power over appropriation.  The Report of the Committee on Public Moneys of 1857 (App 3, p 568) said:  'The chain of historical evidence undeniably proves that a previous and stringent appropriation, often minute and specific, has formed an essential part of the British Constitution.'"

    The last quoted sentence was taken from Durell on Parliamentary Grants[75].  It was repeated by Isaacs and Rich JJ in The Commonwealth v Colonial Ammunition Co Ltd[76], which also involved an executive agreement.  They said of the appropriation requirement[77]:

    "It … neither betters nor worsens transactions in which the Executive engages within its constitutional domain, except so far as the declared willingness of Parliament that public moneys should be applied and that specified funds should be appropriated for such a purpose is a necessary legal condition of the transaction.  It does not annihilate all other legal conditions."

    That view supports the conclusion that appropriation is a necessary condition which takes its place with other conditions and limitations, derived from statute or otherwise, upon the executive power to spend.  The history does not support a view that the requirement for parliamentary appropriation is itself a substantive source of power to expend public money.

    [72]The Commonwealth v Colonial Combing, Spinning and Weaving Co Ltd (1922) 31 CLR 421; [1922] HCA 62.

    [73]For example, Barton v The Commonwealth (1974) 131 CLR 477; [1974] HCA 20; New South Wales v The Commonwealth ("the Seas and Submerged Lands Case") (1975) 135 CLR 337; [1975] HCA 58; Johnson v Kent (1975) 132 CLR 164; [1975] HCA 4; Davis v The Commonwealth (1988) 166 CLR 79; [1988] HCA 63.

    [74](1922) 31 CLR 421 at 449.

    [75]Durell, The Principles and Practice of the System of Control over Parliamentary Grants, (1917) at 3.

    [76](1924) 34 CLR 198 at 224.

    [77](1924) 34 CLR 198 at 224-225.

    The appropriation of moneys – s 81

81. Consideration of s 81 requires an examination of its text, albeit that examination may be informed by the history already outlined. The section directs that revenues or moneys raised or received by the Executive Government of the Commonwealth "form one Consolidated Revenue Fund". It requires that those revenues or moneys be appropriated in the manner and subject to the charges and liabilities imposed by the Constitution. It also requires that they be appropriated for the purposes of the Commonwealth. These are not words of legislative power in the ordinary sense. They are words of constraint. The manner of appropriation is shortly specified in s 83 and requires that it be made "by law". That can be taken as a reference to appropriation by a statute enacted by the Parliament of the Commonwealth, or otherwise authorised by the Constitution[78].

    [78]It is not necessary for present purposes to consider whether and to what extent particular provisions of the Constitution authorise expenditure in their own terms; see Lawson, "Re-Invigorating the Accountability and Transparency of the Australian Government's Expenditure", (2008) 32 Melbourne University Law Review 879 at 895 fn 135.

82. The textual basis for the proposition that the appropriation provisions of the Constitution should be elevated into a source of substantive power is elusive. In order to ascertain the correctness or otherwise of that proposition it is necessary to have regard to the way in which the provisions have been construed previously in this Court.

83. Section 81 was invoked in aid of Commonwealth power in the Clothing Factory Case[79].  The majority of the Court in that case held that the impugned extension of the operation of a Commonwealth clothing factory to supply clothing to civilians was authorised by the Defence Act 1903 (Cth) and supported by the defence power[80]. Only Starke J, who dissented, considered whether s 81 could be a source of the necessary power. After contrasting s 81 with Art I, §8, cl 1 of the United States Constitution he concluded[81]:

    "The power to appropriate moneys 'for the purposes of the Commonwealth' does not, in my opinion, enable the Commonwealth to appropriate such moneys to any purposes it thinks fit, but restricts that power to the subjects assigned to, or departments or matters placed under the control of the Federal Government by the Constitution."

    [79]Attorney-General (Vict) v The Commonwealth (1935) 52 CLR 533; [1935] HCA 31.

    [80](1935) 52 CLR 533 at 558 per Gavan Duffy CJ, Evatt and McTiernan JJ, 563 per Rich J.

    [81](1935) 52 CLR 533 at 568.

84. In Australian Woollen Mills[82] the Court referred in passing to the basis upon which subsidies were paid to wool manufacturers under the National Security (Wool) Regulations. The Court said of s 81 that it "authorizes the appropriation of the revenues and moneys of the Commonwealth for the purposes of the Commonwealth"[83]. The subsidies could not be described as bounties under s 51(iii) because they were not payable on the production or export of goods. The Court continued[84]:

    "The justification, however, for the appropriation of moneys for paying subsidies would probably, if challenged, be sought in the defence power, which is conferred by s 51(vi)."

    But no contention that there was a want of power to support the subsidy having been raised, the matter was not pursued further.  This passage in the judgment in Australian Woollen Mills seems to suggest that while the Court regarded s 81 as the source of parliamentary authority for appropriation, the power to expend the money had to be found elsewhere.

    [82](1954) 92 CLR 424.

    [83](1954) 92 CLR 424 at 454.

    [84](1954) 92 CLR 424 at 454.

85. These decisions, however, did not foreshadow a consensus on the Court as to the extent of the term "purposes of the Commonwealth" in s 81, which was central to the judgments in the Pharmaceutical Benefits Case[85] and the AAP Case[86].  In the Pharmaceutical Benefits Case a majority of this Court held that the Pharmaceutical Benefits Act 1944 (Cth), which appropriated money to pay chemists for medicines supplied to the public and imposed associated duties on them and medical practitioners, was not authorised by s 81 or the incidental power in s 51(xxxix)[87]. Opinions about the construction of s 81 varied among the members of the Court.

    [85](1945) 71 CLR 237.

    [86](1975) 134 CLR 338.

    [87](1945) 71 CLR 237 at 263 per Latham CJ, 266 per Starke J, 272 per Dixon J (Rich J agreeing at 264), 275 per McTiernan J (dissenting), 282 per Williams J.

86. A wide view was adopted by Latham CJ and by McTiernan J, the latter in dissent.  Latham CJ held that the Commonwealth Parliament has "a general, and not a limited, power of appropriation of public moneys" and that it was for the Parliament to determine whether a particular purpose was a purpose of the Commonwealth[88]. This treated s 81, in effect, as a substantive spending power, albeit it was held not to authorise "legislative control of matters relating to any such objects in respect of which there is no other grant of legislative power"[89].  On this latter basis the impugned Act was beyond power[90].

    [88](1945) 71 CLR 237 at 254, 256.

    [89](1945) 71 CLR 237 at 256.

    [90](1945) 71 CLR 237 at 263.

87. Dixon J, with whom Rich J agreed[91], referred to the "power of expenditure" under s 81 and gave it a wide construction although not as wide as that of the Chief Justice. He said[92]:

    "Even upon the footing that the power of expenditure is limited to matters to which the Federal legislative power may be addressed, it necessarily includes whatever is incidental to the existence of the Commonwealth as a state and to the exercise of the functions of a national government.  These are things which, whether in reference to the external or internal concerns of government, should be interpreted widely and applied according to no narrow conception of the functions of the central government of a country in the world of to‑day."

    Despite the reference to the "power of expenditure", the passage quoted is consistent with the view that "the purposes of the Commonwealth" are to be found in laws made by the Parliament and in the discharge by the Executive of the powers otherwise conferred upon it by the Constitution and particularly by s 61. As his Honour later said, "s 81 has little or no bearing upon the matter"[93].

    [91](1945) 71 CLR 237 at 264.

    [92](1945) 71 CLR 237 at 269.

    [93](1945) 71 CLR 237 at 271.

88. In the event Dixon J did not express a concluded view on the construction adopted by Latham CJ and McTiernan J. It was sufficient for his purposes that s 81 was not to be equated to Art I, §8, cl 1 of the United States Constitution. To do so would import a "conception foreign" to the provisions in the Australian Constitution[94].  He said[95]:

    "The words of our Constitution are 'purposes of the Commonwealth' and whether ultimately they are, or are not, held to be consistent with a power of expenditure unrestrained in point of subject matter or purpose, they cannot be regarded as doing the work which the words 'general welfare' have been required to do in the United States. That is all, I think, that need be decided in the present case about the power of expenditure under the Commonwealth Constitution."

    Importantly he added that, in deciding what appropriation laws might validly be enacted, it would be necessary to remember the position occupied by a national government and "to take no narrow view"[96].  The "basal consideration", he said in a passage that would be described 43 years later as a "Delphic counsel"[97], "would be found in the distribution of powers and functions between the Commonwealth and the States"[98].

    [94](1945) 71 CLR 237 at 270.

    [95](1945) 71 CLR 237 at 271.

    [96](1945) 71 CLR 237 at 271.

    [97]Australia, Final Report of the Constitutional Commission, (1988), vol 2 at 832 [11.300].

    [98](1945) 71 CLR 237 at 271-272. Similar considerations were referred to by Evatt J, albeit in a different context, in Federal Commissioner of Taxation v Official Liquidator of E O Farley Ltd (1940) 63 CLR 278 at 319-320; [1940] HCA 13.

89. Starke J, like Dixon J, rejected the equation of s 81 to Art I, §8, cl 1 of the United States Constitution, and said[99]:

    "[t]he purposes of the Commonwealth are those of an organized political body, with legislative, executive and judicial functions, whatever is incidental thereto, and the status of the Commonwealth as a Federal Government."

    The Pharmaceutical Benefits Act was "beyond any purpose of the Commonwealth"[100]:

    "No legislative, executive or judicial function or purpose of the Commonwealth can be found which supports it, and it cannot be justified because of the existence of the Commonwealth or its status as a Federal Government."

    An implication in the reasoning of Starke J was that an appropriation could be justified for the exercise of an executive function.

    [99](1945) 71 CLR 237 at 265-266.

    [100](1945) 71 CLR 237 at 266.

90. Williams J regarded "the purposes of the Commonwealth" as words of limitation[101].  The purposes had to be found "within the four corners of the Constitution".  The Pharmaceutical Benefits Act could not be supported on that basis[102].

    [101](1945) 71 CLR 237 at 282.

    [102](1945) 71 CLR 237 at 282.

91. At issue in the AAP Case[103] was the validity of an appropriation of money for the Australian Assistance Plan, under which grants were to be made to Regional Councils for Social Development programs.  Six of the Justices were evenly divided on the validity of the legislation[104].  Stephen J held that neither the State nor its Attorney-General had standing to impugn the legislation[105].  The challenge therefore failed on two different bases.

    [103](1975) 134 CLR 338.

    [104](1975) 134 CLR 338 at 364 per Barwick CJ, 378 per Gibbs J, 401 per Mason J (against validity); 370 per McTiernan J, 413 per Jacobs J, 425 per Murphy J (in favour of validity).

    [105](1975) 134 CLR 338 at 390-391.

92. Barwick CJ held that the words "purposes of the Commonwealth" in s 81 were words of limitation and not a matter for the Parliament to determine[106]. They were not confined to the heads of legislative power in ss 51 and 52. Some powers, legislative and executive, might come from the formation of the Commonwealth as a polity and its emergence as an international state. The extent of powers inherent in the fact of nationhood and of international personality had not been fully explored. They included the power to explore on foreign lands or seas or in areas of scientific knowledge or technology[107].  But to say of a matter that it was of national interest or concern did not attract power to the Commonwealth.  Recognising that Australia has but one economy and that the economy of the nation is of national concern, Barwick CJ said[108]:

    "But no specific power over the economy is given to the Commonwealth.  Such control as it exercises on that behalf must be effected by indirection through taxation, including customs and excise, banking, including the activities of the Reserve Bank and the budget, whether it be in surplus or in deficit.  The national nature of the subject matter, the national economy, cannot bring it as a subject matter within Commonwealth power."

    The federal distribution of powers was an important element in the reasoning of the Chief Justice, who said in that connection[109]:

    "However desirable the exercise by the Commonwealth of power in affairs truly national in nature, the federal distribution of power for which the Constitution provides must be maintained."

    [106](1975) 134 CLR 338 at 360.

    [107](1975) 134 CLR 338 at 362.

    [108](1975) 134 CLR 338 at 362.

    [109](1975) 134 CLR 338 at 364.

93. McTiernan J adhered to the wide view he and Latham CJ had adopted in the Pharmaceutical Benefits Case[110].  Gibbs J considered that the power of appropriation was not general and unlimited but could only be exercised for purposes which the Commonwealth could "lawfully put into effect in the exercise of the powers and functions conferred upon it by the Constitution"[111]. They were purposes for which the Commonwealth had power to make laws but were not limited to those mentioned in ss 51 and 52. They could include "matters incidental to the existence of the Commonwealth as a state and to the exercise of its powers as a national government"[112].

    [110](1975) 134 CLR 338 at 369.

    [111](1975) 134 CLR 338 at 373-374.

    [112](1975) 134 CLR 338 at 375.

94. Stephen J's refusal to accord standing to the State of Victoria to challenge the appropriation in the AAP Case rested on the basis that what was complained of was "not truly an instance of law making but rather an example of the exercise of fiscal control over the executive by the legislature"[113]. This was consistent with the view, albeit he did not articulate it, that s 81 was not a source of substantive legislative power.

    [113](1975) 134 CLR 338 at 390.

95. Mason J adopted the wide construction of "purposes of the Commonwealth" in s 81[114].  However, like Latham CJ in the Pharmaceutical Benefits Case, he held that the section was not a source of "legal authority for the Commonwealth's engagement in the activities in connexion with which the moneys are to be spent"[115]. He referred to s 51(xxxix) of the Constitution and its conjunction with s 61, relied upon in Burns v Ransley[116] and R v Sharkey[117], and added[118]:

    "Secondly, the Commonwealth enjoys, apart from its specific and enumerated powers, certain implied powers which stem from its existence and its character as a polity … So far it has not been suggested that the implied powers extend beyond the area of internal security and protection of the State against disaffection and subversion. But in my opinion there is to be deduced from the existence and character of the Commonwealth as a national government and from the presence of ss 51(xxxix) and 61 a capacity to engage in enterprises and activities peculiarly adapted to the government of a nation and which cannot otherwise be carried on for the benefit of the nation."

    The establishment of the Commonwealth Scientific and Industrial Research Organisation was an exercise of that national governmental capacity by the Commonwealth.  So too was expenditure of money on inquiries, investigation and advocacy in matters of public health.  Mason J said[119]:

    "No doubt there are other enterprises and activities appropriate to a national government which may be undertaken by the Commonwealth on behalf of the nation.  The functions appropriate and adapted to a national government will vary from time to time.  As time unfolds, as circumstances and conditions alter, it will transpire that particular enterprises and activities will be undertaken if they are to be undertaken at all, by the national government."

    [114](1975) 134 CLR 338 at 396.

    [115](1975) 134 CLR 338 at 396.

    [116](1949) 79 CLR 101; [1949] HCA 45.

    [117](1949) 79 CLR 121; [1949] HCA 46.

    [118](1975) 134 CLR 338 at 397.

    [119](1975) 134 CLR 338 at 397-398.

593. The defendants accepted that "the Commonwealth has no specific power to manage the national economy"[688], but submitted that this was nevertheless what it had increasingly been doing over the last century. Thus the purposes stated in s 10(2) of the Reserve Bank Act were purposes of the Commonwealth, even before 1959.

     [688]See Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 362 per Barwick CJ.

     The defendants' seven factors considered

594. The first and second arguments put aside.  The first and second arguments assume that s 81 is a source of legislative power to confer on the Executive power to spend.  Thus they have no significance if the conclusion is reached that s 81 is not a source of that legislative power.  In this event, the question of what "the purposes of the Commonwealth" means does not arise.  If that question, which is dealt with below[689], does arise, the defendants' arguments are no more than claims that s 81 could have been more clearly drafted.  Claims of that kind in this instance are weak and not determinative.  

     [689]At [608].

595. The third argument:  asymmetry between s 51(ii) and s 81.  The third argument appealed to an asymmetry which would arise from the fact that s 51(ii) contained a power to tax for purposes wider than those which the legislature could pursue if the power to spend were limited only to those purposes within the power of the Parliament conferred otherwise than by s 81. This exaggerates the asymmetry: for example, the Commonwealth is entitled to spend under s 96, in cooperation with the States, in relation to matters on which it has no legislative power. And the question: "For what purposes may taxation be raised?" is distinct from the question: "For what purposes may legislation in relation to the money so raised be enacted?" While it may now be unlikely that there will ever be scope for s 94 to operate in the future, it was not necessarily unlikely in 1901. Section 90 denied the States those powers formerly enjoyed by the colonies to raise monies by duties of customs and excise. It deprived them of what had formerly been their main source of income. That meant that other sources of income would have to be found. Two of those sources of income were s 94 and s 96. Those sections pointed to the possibility that what the Commonwealth raised by taxation might legitimately be more than it would need for its limited purposes[690]. 

     [690]Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 354-356.

596. Difficulties created by constitutional limit on power of appropriation.  The fourth factor relied on the difficulties facing the Court in determining whether an appropriation had exceeded constitutional power, and the difficulties facing the legislature in seeking to avoid constitutional invalidity.  Difficulties though they may be, they were not shown to be greater than those which face the Court in deciding whether non-appropriation legislation was valid, and those which face the legislature in seeking to avoid enacting non-appropriation legislation which was invalid.  The occasional declaration that federal legislation is invalid does not cause the progress of government to be unduly chilled or stultified.  In any event, this fourth consideration, like the fifth, which in itself is not decisive, goes more to the question of what the expression "the purposes of the Commonwealth" means than to the question of whether s 81 confers an independent legislative power to confer on the Executive a power to expend monies appropriated. 

597. Impact on States.  The sixth factor related to the impact on State legislative power if s 81 were construed as giving an independent legislative power to confer on the Executive a power to expend monies appropriated. If the federal power were widely used, the impact on State legislative power would be considerable. Further, as New South Wales said, there would be an impact on the operation of s 96. The defendants' submission that s 96 was consistent with a wide construction of s 81 as a source of legislative power, because s 96 grants could be made for purposes not limited to purposes otherwise within the power, is flawed. The making of s 96 grants depends on consultation with, and the cooperation of, the States. If s 81 created a wide power to authorise expenditure and s 51(xxxix) permitted enactment of legislation incidental to it so as to constitute an independent head of legislative power much wider than those in ss 51 and 52, it is a head of power which would be exercisable whether or not the States agreed.

598. Legislative practices.  As to the seventh factor, the defendants' reliance on longstanding legislative practices brought about by the conduct of the Executive in choosing what kinds of Bill to introduce must be wholly rejected.  They are practices which have often been controversial[691]. When they have not been controversial, that is partly because they are practices which have been devoted to relatively minor but beneficial ends. And to construe the Constitution in the light of actual executive and legislative practices involves a misconception of the correct relationship between the Court on the one hand and the Executive and the legislature on the other. It inverts the correct approach. The Court decides what the Constitution means in the light of its words. It does not infer what the Constitution means from the way the Executive and the legislature have behaved. The development of particular legislative practices in reliance on particular decisions of the Court construing the Constitution in a certain way may be a consideration militating against the overruling of those decisions[692]. But there are no decisions of that kind relevant to the present problem. Executive and legislative practice cannot make constitutional that which would otherwise be unconstitutional. Practice must conform with the Constitution, not the Constitution with practice. The fact that the executive and legislative practices may have generated benefits does not establish that they are constitutional; for it has not been shown that the same benefits could not have been generated on a different view of s 81 from that which the defendants propound. Nor has it been shown that they could not have been based on the legislative powers set out in s 51[693]. 

     [691]For examples, see Saunders, "The Development of the Commonwealth Spending Power", (1978) 11 Melbourne University Law Review 369 at 381-386. 

     [692]Queensland v The Commonwealth (1977) 139 CLR 585 at 600; [1977] HCA 60.

     [693]This may be seen from the examples given by the defendants.  The Trans-Pacific Flight Appropriation Act 1934 (Cth) made a grant of £5,000 to the widow of Charles Ulm, who flew across the Pacific with Charles Kingsford Smith in 1928 and died while attempting a crossing of the Pacific 14 days before the Act was given royal assent: it may have been supportable by s 51(xxiii). See McCarthy, "Charles Thomas Philippe Ulm", in Ritchie (ed), Australian Dictionary of Biography, Volume 12:  1891-1939, (1990) 302 at 302.  So may the Special Annuity Act 1934 (Cth): it provided for payment of an annuity of £156 per annum to the widow of D C McGrath, who had been a member of the House of Representatives for 21 years and whose estate was valued for probate at only £944 (Love, "David Charles McGrath", in Nairn and Serle (eds), Australian Dictionary of Biography, Volume 10:  1891-1939, (1986) 275 at 275).  That Act may also have been supportable by the head of power discussed in Brown v West (1990) 169 CLR 195. The Wool Publicity and Research Act 1936 (Cth) may have been supportable under s 51(i) (see s 13(b), which stated one of the Act's purposes to be the increasing and extending of the use of wool throughout the world). The National Fitness Act 1941 (Cth) may have been supportable by the defence power. The Home Deposit Assistance Act 1982 (Cth) may have been supportable, at least in its operation in relation to married persons, by s 51(xxi). The Farm Household Support Act 1992 (Cth) and the Dairy Industry Adjustment Act 2000 (Cth) may have been supportable under s 51(xxiiiA). The Nation-building Funds Act 2008 (Cth) may be supportable under s 96.

599. Although South Australia advocated a wide view of s 81, it declined to align itself with the defendants' submission so far as it depended on the contrary legislative practice of the Commonwealth.  There is force in the language it used in that regard:

     "The Commonwealth cannot now turn to its advantage, as a factor tending in favour of an expanded view of Commonwealth power, the fact that it has acted in disregard of the clearly expressed views of a majority of this Court for over 60 years^[[694]^].  No encouragement should be [given] to the Commonwealth to ignore the decisions and reasoning of this Court as to the limits of its powers, by attaching significance to the fact that the Commonwealth has acted on the assumption that the views expressed by the Court are wrong."

     The defendants countered this submission by referring to supposed contrary legislative practice before 1945, but that does not improve their position. 

     [694]This is a reference to Attorney-General (Vict) v The Commonwealth (1945) 71 CLR 237 at 265-266 per Starke J, 271-272 per Dixon J (with whom Rich J agreed at 264) and 282 per Williams J.

     No independent head of legislative power in s 81

600. It is necessary to reject the defendants' submission that s 81 creates an independent head of legislative power in the sense that the "legislative power" to appropriate carries with it a power to authorise the Executive to spend the funds appropriated. 

601. The important but narrow function of appropriation.  Statutory language effectuating an appropriation merely creates a capacity to withdraw money from the Consolidated Revenue Fund and set it aside for a particular purpose. The appropriation regulates the relationship between the legislature and the Executive. It vindicates the legislature's long-established right, in Westminster systems, to prevent the Executive spending money without legislative sanction. The appropriation of public revenue operates as a grant by the legislature to the Executive giving the Executive authority to segregate the relevant money issued from the Consolidated Revenue Fund and to dedicate it to the execution of some purpose which either the Constitution has itself declared, or Parliament has lawfully determined, shall be carried out[695].  It also operates so as to restrict any expenditure of the money appropriated to the particular purpose for which it was appropriated[696].  That is, it creates a duty – a duty not to spend outside the purpose in question.  Beyond that it creates no rights and it imposes no duties[697].  Nor does it create any powers.  It fulfils one pre-condition to expenditure.  It does not do away with other pre-conditions to expenditure.  Of itself it gives no untrammelled power to spend. 

     "[Appropriation] neither betters nor worsens transactions in which the Executive engages within its constitutional domain, except so far as the declared willingness of Parliament that public moneys should be applied and that specified funds should be appropriated for such a purpose is a necessary legal condition of the transaction.  It does not annihilate all other legal conditions."[698]

     One relevant legal pre-condition which must be satisfied is the existence of power to spend what has been appropriated. Whether the Executive has power to spend the money will depend on there being either a conferral of that power on it by legislation or some power within s 61 of the Constitution.

     [695]The State of New South Wales v The Commonwealth (1908) 7 CLR 179 at 190 and 200; [1908] HCA 68. See also Attorney-General (Vict) v The Commonwealth (1945) 71 CLR 237 at 248.

     [696]The Commonwealth v Colonial Ammunition Co Ltd (1924) 34 CLR 198 at 222 and 224-225.

     [697]Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 386-387, 392‑393 and 411.

     [698]The Commonwealth v Colonial Ammunition Co Ltd (1924) 34 CLR 198 at 224-225 per Isaacs and Rich JJ.

602. Hence the effect of an appropriation is to operate as an "earmarking"[699] or a means of "legally segregating"[700] or a "provisional setting apart or diversion from the Consolidated Revenue Fund of the sum appropriated"[701]; to prevent the money from being used for any purpose other than the purpose for which it was appropriated; and to prevent it from being treated as "surplus revenue of the Commonwealth" for the purposes of s 94 of the Constitution[702].  Having regard to the received meaning of "appropriation", the greatest power that s 81 could confer on the legislature is a power to earmark funds in the Consolidated Revenue Fund.  By its terms, s 81 could go no further than giving Parliament a power to appropriate.  It does not confer a power on the Parliament to authorise the Executive to expend the appropriated funds.  And it does not confer a power on the Parliament to regulate expenditure made, by imposing a duty on the Executive or imposing a right in a third party, or otherwise.   

     [699]Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 411 per Jacobs J.

     [700]The State of New South Wales v The Commonwealth (1908) 7 CLR 179 at 200 per Isaacs J.

     [701]The State of New South Wales v The Commonwealth (1908) 7 CLR 179 at 190-191 per Griffith CJ.

     [702]The State of New South Wales v The Commonwealth (1908) 7 CLR 179. Section 94 is set out at [291] n 314.

603. The creation of rights, duties and powers.  Even though there may be legislation giving a power to spend the money appropriated, or even though an aspect of the executive power permits expenditure, the Commonwealth may desire the expenditure of the money appropriated to be carried out in conformity with particular rights, duties or powers.  The creation of a power beyond the power to spend will almost always involve the creation of a duty.  That is because if the power is to be exercised, someone against whose interests it is exercised will have to be compelled to comply with the exercise of the power through the creation of an enforceable duty to obey the person exercising it.  If a provision in an enactment creates rights or imposes duties or confers powers, it is not an appropriation provision.  Hence the creation of rights, the imposition of duties and the conferral of powers cannot be effected by the statutory words effecting the appropriation.  Those acts of creation, imposition and conferral can only be effected by some legislation other than the statutory words making the appropriation[703].  A provision in an enactment creating rights, imposing duties or conferring powers cannot rest on ss 81 and 83, for it goes beyond mere appropriation.  The validity of such a provision must find its source, if anywhere, in some other head of Commonwealth legislative power. 

     [703]Campbell, "Parliamentary Appropriations", (1971) 4 Adelaide Law Review 145 at 161-162.

604. A decision of the Executive to spend the monies appropriated will be invalid if it is beyond executive power and unsupported by a valid enactment. It follows that the defendants' submission that the Executive's power to spend is necessarily coterminous with the legislature's "power" to appropriate is erroneous. The Executive's power to spend depends on finding legislation permitting the expenditure or on finding support for the expenditure in s 61. If the latter course is embarked on, it must be remembered that, for reasons given earlier, the executive power is no wider than the legislative[704], subject to the possibility of a small extension if Mason J's test in Victoria v The Commonwealth and Hayden[705] is correct. Since s 81 does not confer a legislative power to authorise expenditure, s 51(xxxix) cannot be a source of power to enact laws as an incident of any such power. The power to spend appropriated money does not extend beyond the limits of authority conferred by legislation empowered otherwise than by s 81 and the limits of the executive power of the Commonwealth under s 61. Hence, s 51(xxxix) cannot be a source of power to enact laws as an incident of the execution of any wider power to spend.

     [704]Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 398: see [519] above.

     [705](1975) 134 CLR 338 at 397: see above at [511].

605. If the defendants' submission were correct (and if the words "for the purposes of the Commonwealth" had a wide meaning), Commonwealth legislative power would extend well beyond the boundaries marked elsewhere in the Constitution. Accordingly, on the principles of construction stated by O'Connor J in the Jumbunna case[706], the narrower view of s 81 is to be preferred – it creates no "legislative power" to confer on the Executive a power to spend what is appropriated.

     [706](1908) 6 CLR 309 at 367-368: see [405] and [413] above.

606. Constitutional language.  That conclusion – that ss 81 and 83 do not create a grant of legislative power to authorise expenditure – is supported by the following parts of the Constitution. Chapter I Pt V is headed "Powers of the Parliament". It would be expected that the grants of legislative power are to be found in that Part. In that Part, ss 51 and 52 set out many legislative powers, and the succeeding sections set out various powers and restrictions on powers of the Parliament and its two Houses. The defendants submitted that that was not conclusive, since powers could also be found in the Chapter in which ss 81 and 83 were placed, namely Ch IV, which is headed "Finance and Trade". They gave ss 94 and 96 as examples. But the power to provide in the manner described in s 96 is actually found in Ch I Pt V, particularly s 51(xxxvi)[707]. Section 94 is not, or at least not primarily, a power to legislate. And in other parts of their argument the defendants treated s 94 as obsolete. Further, the defendants' argument does not confront the difficulty that the only words which can support a power in s 81 are the words "to be appropriated". Even if those words confer a power, it must be limited to a power of appropriation. But the authorities say that an appropriation of money is simply the earmarking or segregating of it from the Consolidated Revenue Fund. Hence, at most, s 81 could confer a power so to earmark or segregate.

     [707]Section 96 provides:

     "During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit." (emphasis added)

     Section 51(xxxvi) gives the Parliament power to make laws with respect to "matters in respect of which this Constitution makes provision until the Parliament otherwise provides".

607. Conclusion.  Section 81 does not create a "legislative power" to confer on the Executive the power to spend what is appropriated. 

     "For the purposes of the Commonwealth" has a narrow meaning

608. Even if, contrary to what has just been said, an appropriation under s 81 and s 83 does give the Executive power to spend the money appropriated, the defendants' submission must be rejected on a separate ground. It relates to the construction of the words "for the purposes of the Commonwealth" in s 81. Those words do not have the wide meaning urged by the defendants. Section 81 does not give the Commonwealth a power to make appropriations for the general welfare. That is because if it did, it would, taken with the executive power to spend (which for the purposes of considering the present argument is assumed to be conferred by the appropriation) and a power to legislate under s 51(xxxix) as an incident to it, make the Commonwealth a government of general and unlimited legislative powers, despite the enumeration in other sections of the Constitution of specific powers. On O'Connor J's principles of construction, again, the narrower construction must be preferred. In Attorney-General (Vict) v The Commonwealth Dixon J said that to read s 81 as giving the Commonwealth a power to enact laws for the general welfare "would be to amend the Constitution, not to interpret it."[708] The power of appropriation is limited by s 83. Of that limitation, Dixon J said[709]: 

     "[Section] 83, in using the words 'by law' limits the power of appropriation to what can be done by the enactment of a valid law.  In deciding what appropriation laws may validly be enacted it would be necessary to remember what position a national government occupies and … to take no narrow view, but the basal consideration would be found in the distribution of powers and functions between the Commonwealth and the States."

     In the same case[710] Starke J rejected the view that the appropriation power authorised the Commonwealth to appropriate its revenues and monies for any purpose whatsoever, and suggested that the expenditure had to be for the purpose of and incidental to some other matter which belongs to the federal government.  Williams J was of a similar opinion[711].  Rich J agreed with Dixon J[712].  Now it is true, as the defendants submitted, that Dixon J said that the controversy in Attorney-General (Vict) v The Commonwealth did not require the Court to choose between his view and the wider view advocated by the present defendants[713].  But he did say that the view he expressed was what his view had always been[714], and that he had not yet seen any reason to desert that opinion[715].  Barwick CJ agreed with it[716].  So did Gibbs J[717].  On the other hand, various other judges have not[718].  The statement of Dixon J quoted above has been criticised as unclear[719]. After allowances have been made for the inherent difficulty of the subject matter, and for a compressed manner of expression, that criticism must be rejected. When Dixon J said that s 83, in using the words "by law", limits the power of appropriation to what can be done by the enactment of a valid law, he meant that it was not possible to appropriate money for purposes beyond those which could be achieved by enacting legislation validly under Commonwealth legislative power. That was the position he had taken up in his evidence to the Royal Commission on the Constitution[720]. That is what he meant when he said that the view he expressed in that passage was what his view had always been and that he had not yet seen any reason to desert it. The defendants submitted that Dixon J's approach "requires the bare reference to 'law' in s 83 to do too much work." They did not explain why.

     [708](1945) 71 CLR 237 at 271.

     [709](1945) 71 CLR 237 at 271-272.

     [710](1945) 71 CLR 237 at 265-266.

     [711](1945) 71 CLR 237 at 282.

     [712](1945) 71 CLR 237 at 264.

     [713](1945) 71 CLR 237 at 269.

     [714](1945) 71 CLR 237 at 271.

     [715](1945) 71 CLR 237 at 272.

     [716]Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 356 and 363.

     [717]Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 371 and 373‑375.

     [718]Attorney-General (Vict) v The Commonwealth (1945) 71 CLR 237 at 256 per Latham CJ and 273 per McTiernan J; Victoria v The Commonwealth and Hayden (1975) 134 CLR 338 at 369 per McTiernan J, 396 per Mason J, 411 per Jacobs J and 417 per Murphy J.

     [719]Australia, Final Report of the Constitutional Commission, (1988), vol 2 at 832 [11.300].

     [720]See above at [309].

     The Tax Bonus Act is not incidental to the appropriation

609. Section 51(xxxix) gives power to make laws with respect to matters incidental to the "execution" of a power vested in Parliament or the Executive. An appropriation merely authorises the withdrawal of money from the Consolidated Revenue Fund, not the expenditure of that money[721].  Hence a statute creating rights or imposing duties in relation to the money withdrawn from the Consolidated Revenue Fund goes beyond being merely incidental to the withdrawal.  The rights and duties are not just an incident of the execution of the power to withdraw the money from that Fund – something naturally appertaining or attaching to it, or subordinate, subsidiary, or ancillary to it, or consequential on it, or "something which attends or arises in its exercise"[722].  The creation of rights or duties in relation to the expenditure of appropriated monies is something outside that which attends or arises in the exercise of the executive power to withdraw money from the Fund. 

     [721]See above at [601].

     [722]Le Mesurier v Connor (1929) 42 CLR 481 at 497 per Knox CJ, Rich and Dixon JJ; [1929] HCA 41.

610. If s 81 is limited solely to a power to withdraw or segregate or earmark money from the Consolidated Revenue Fund, and confers no power to spend, there is no scope for s 51(xxxix) to operate. This is because the appropriation is complete as soon as the funds are withdrawn or segregated or earmarked. There is nothing further to execute.  Hence, there is nothing incidental to the execution of the legislative power to withdraw or segregate or earmark which can be done once the withdrawal or segregation or earmarking has taken place. 

611. Further, to paraphrase the language of Dixon J in Attorney-General (Vict) v The Commonwealth[723], in this case appropriation of the necessary money is the consequence of the plan to create rights and duties in relation to the bonuses; the plan is not consequential upon or incidental to the appropriation of money.  The following words of Latham CJ are also relevant[724]: 

     "The result of a contrary view would be that, by the simple device of providing for the expenditure of a sum of money with respect to a particular subject matter, the Commonwealth could introduce a scheme which in practice would completely regulate and control that subject matter. The Commonwealth Parliament would thus have almost unlimited legislative power. The careful delimitation of Commonwealth powers made by the Constitution prevents the adoption of such an opinion."

     [723](1945) 71 CLR 237 at 270.

     [724]Attorney-General (Vict) v The Commonwealth (1945) 71 CLR 237 at 263.

612. Here the rights of intended recipients to be paid the tax bonuses and the obligation on the Commissioner to pay them arise from the Tax Bonus Act. The point of seeking to appropriate the necessary monies by the standing appropriation in s 16 of the Taxation Administration Act was to enable those rights to be vindicated and that obligation to be carried out. The rights to be paid and the obligation to pay cannot be incidental to the appropriation which enables the rights to be vindicated and the obligation to be fulfilled.

     VALID APPROPRIATION

613. Question 3 in the Special Case is set out above[725]. Since it cannot be said that the plaintiff was "entitled" to payment of the tax bonus under the Tax Bonus Act, because that Act is invalid, this question does not arise.

     CONCLUSION

     [725]At [269].

614. The questions in the Special Case should have been answered: 

     1.        Yes.

     2.        No.

     3.Does not arise.

     4. In accordance with the agreement of the parties announced on the second day of the hearing of the Special Case, there is no order for costs.