[2] Const Heads of Power - (3) GRANTS - S 96

Question 1

Requirements for a valid grant

Answer 1

Per Wilson J in DOGS case, under s 96 legislation must be:

(1) Be a non-coercive law;
(2) Grant money for a stipulated purpose;
(3) The States must have the right to accept or refuse the grant

Question 2

What type of coercion is permitted with respect to grants under s 96?

Answer 2

Can’t be legally coercive, BUT may be politically or economically coercive (confirmed by Dixon J in Second Uniform Tax Case)

Question 3

Per the DOGS case, what 2 things aren’t necessary to have a valid grant?

Answer 3

a) That the grant should benefit a state treasury;

b) That the purpose of the grant be within an express legislative power of the Cth

Question 4

Can Cth Parliament set any conditions when it makes grants under s 96 ?

Answer 4

YES - even if it requires the States to take measures which the Cth could not itself take because the subject matter is beyond the s 51 heads of power (First Uniform Tax Case)

Question 5

What’s a caveat to the fact that Cth Parliament can set any conditions it wants under s 96 in making grants?

Answer 5

Any condition imposed must be within the State’s constitutional competence to fulfil: Dixon J in Second Uniform Tax Case

Question 6

Can the Cth discriminate btw states when granting $$? (aka can it circumvent constitutional prohibitions against discrimination btw states)

Answer 6

Yes (First Uniform Tax Case), s 96 is not circumscribed by the prohibition on discriminating btw States within s 51(ii)

Question 7

Can the Cth Parliament circumvent express constitutional rights?

Answer 7

No - In DOGS, HCA indicated it will take a strict approach and prevent s 96 from being used to circumvent constitutional prohibitions which grant express rights (eg freedom of religion)

Question 8

Can the HCA circumvent constitutional requirements to acquire property ‘on just terms’ (s 51(xxxi))?

Answer 8

Most recent position is that s 96 DOES NOT permit the Cth to make a grant to a State on terms/conditions requiring the State to acquire property on other than just terms (DOGS case)

Question 9

[re he HCA circumventing constitutional requirements to acquire property ‘on just terms’] –> What did Pye v Renshaw hold?

Answer 9

In light of Pye v Renshaw, if the legislation is drafted appropriately, the Cth may be able to avoid the Constitutional limitation imposed by s 51(xxxi) through imposing condition on State to use its legislative powers to acquire property not on just terms

Question 10

[re he HCA circumventing constitutional requirements to acquire property ‘on just terms’] –> Cth legislation may nevertheless be valid if it the State legislation states:

Answer 10

it takes effect ‘unconditioned’ by Cth legislation and irrespective of any agreement between Cth and State

Question 11

Facts in the First Uniform Tax Case (1942)

Answer 11

• WWII - needed some centralisation of power for financial control - inefficient to fund war separately from each state’s revenue
• So, Cth made the Income Tax Act and the State Grants (Income Tax Reimbursement Act)

Question 12

Facts in the First Uniform Tax Case (1942) - what did the Income Tax Act do and why was it uniform?

Answer 12

raised level of taxes to an amount equal to:
(1) The level of Cth income tax that the Cth wanted to raise itself; and
(2) The level of existing State taxes plus Cth taxes
Overall tax burden on the individual tax burden was extremely high if both Cth and State taxes collected

Was uniform to avoid discrimination between States

Question 13

Facts in the First Uniform Tax Case (1942) - what did the State Grants (Income Tax Reimbursement Act) do?

Answer 13

provided that a grant by way of s 96 would be given to each State, equal to that which it had foregone in its own income tax, on condition that a State did not impose income tax

Question 14

What was an issue the court had in the Facts in the First Uniform Tax Case (1942) in terms of the Income Tax Act and State Grants Act?

Answer 14

Issue about whether the courts should examine these separately or as a whole and characterise them in terms of their practical outcome
- if viewed as a whole would amount to a colourable device to overcome discrimination prohibitions in s 51(ii).

Question 15

Outcome in First Uniform Tax Case (1942)

Answer 15

Both statutes were valid! (Court considered them separately)

Question 16

In First Uniform Tax Case (1942) why was the Income Tax Act valid?

Answer 16

valid despite the fact that the rate was so high because:

(1) it was wrt taxation and
(2) was no discrimination between the states (no legal limit on tax rate)

+ irrelevant that motive was to prevent States imposing tax, as s 51(ii) is a non-purposive power.

Question 17

In First Uniform Tax Case (1942) why was the State Grants Act valid?

Answer 17

The Act only offered an inducement not to impose tax – no legal compulsion (didn’t purport to deprive State of ability to impose income tax, –> if a State did so it would not benefit from the grants, but there is nothing in the Act that would make that invalid)

s 96 has no prohibition on discrimination,

Even though conditions might be onerous or go beyond what s 51 requires/to subject matters that s 51 does not extend, it will nonetheless be valid

Question 18

Facts in Second Uniform Tax Case (1957)?

Answer 18

challenged the same legislation in 1st Uniform Tax Case (Income Tax Act + State Grants Act)

Question 19

as an aside why was s 221 of the Income Tax Assessment Act invalid in the 2nd Uniform Tax Case (1957)?

Section was wrt to its requirement that priority be given to Cth income tax payments

Answer 19

held INVALID as not within taxation power

-The only way the Act would fall within the implied incidental power for s 51(ii) would be if it were absolutely necessary to collect federal tax. Here, no need to exclude the sates (effectively) from collecting income tax

Question 20

Would s 221 of the Income Tax Assessment Act in the 2nd Uniform Tax Case (1957) be valid today?

Section was wrt to its requirement that priority be given to Cth income tax payments

Answer 20

Act may be valid today whereby the implied incidental power may be exercised where it is reasonably appropriate and adapted (not necessary) to effectuate the exercise of the power:

Mason J in Nationwide News

Question 21

Outcome in Second Uniform Tax Case (1957)?

Answer 21

State Grants Statute valid! - confirmed liberal reading of s 96 from 1st Uniform Tax Case

Question 22

In Second Uniform Tax Case (1957) - Dixon CJ concerned that s 96 may be limited by the considerations arising from the Melbourne Corporation doctrine –> what happened in that case?

Answer 22

The Cth had made grants to the States on condition that they built certain highways.

Some of these highways were purely intrastate, which would have been beyond the trade and commerce. Nevertheless, this was a valid grant – conditions not limited to what was permitted to the Cth under s 51

Question 23

In Second Uniform Tax Case (1957) what refinement of principles emerged

Answer 23

(1) Commonwealth is limited to the granting of money to governments
(2) Nothing in s 96 authorises the making of a coercive law in the legal sense
(3) The grant, and the conditions attached, to be valid, must be within the States’ constitutional competence to fulfil the conditions attached

Question 24

Does there need to be request for relief or reason for giving assistance which is not itself created by the Cth legislation connected with the grant?

Answer 24

After 2nd Uniform Tax Case (1957) no!

Question 25

Test from 2nd Uniform Tax Case (1957)

Answer 25

where the Cth gives grants to States on condition that they use the money for a certain purpose, ask the following questions to determine whether the grant is valid:
o (1) Is the law valid under s 96?
o (2) If yes → further inquiry as to whether the law goes beyond the admissibility of the terms and conditions that the law may have sought to impose

Question 26

Facts of Deputy Federal Commissioner of Taxation (NSW) v WR Moran P/L (1939):

Answer 26

• The Commonwealth imposed uniform taxes on flour millers [the uniform taxing statute]
• The Wheat Industry Assistance Act 1938 (Cth) returned these taxes to the States in the form of grants, with conditions attached [the grant statute]
• Condition: States distribute these monies to wheat growers in proportion to the quantities of wheat they produced, the idea being to support wheat growers and also to help to maintain a stable price

Question 27

What was the impact on Tasmania in Moran (1939) from the taxing + grant act?

Answer 27

o Tasmanian offered a special case because no wheat was grown there and hence its flour millers were taxed, but the monies were not returned to its wheat growers (as none existed), but rather to Tas govt to reimburse the flour millers

• The effect was that Tasmanian flour millers were not in substance being taxed, unlike their interstate counterparts

Question 28

Issue in Moran (1939)

Answer 28

Was this combined scheme a colourable device to overcome the prohibition on discrimination in 51(ii)?

Question 29

Outcome in Moran (1939)?

Answer 29

Scheme was valid!

• (1) taxing provision didn’t discriminate (applied equally)
• (2) s 96 enables Cth to treat states differently, no prohibition on discrimination

Question 30

What was the strong dissent in Moran (1939)?

Answer 30

Evatt J (view likely adopted today?)

Held the scheme to be invalid because he saw the scheme as a composite one, designed to evade the constitutional limitations on the Commonwealth found elsewhere in the Constitution

said you should view the tax and grant provisions together!

Question 31

What did the privy council say about strong dissent in Moran (1939)?

Answer 31

They upheld majority’s decision, but provided some support for Evatt’s dissent.

• The Privy Council stated that there may be circumstances where the use of s 96 is merely colourable,
  i. e. “under the guise or pretence of assisting a State with money, the real substance and purpose of the Act might simply be to effect a discrimination in regard to taxation.”

Question 32

Application of Privy Council’s support of Evatt J’s dissenting view in Moran to the facts?

Answer 32

o This means that the proposition put forward by Evatt J would be accepted by the PC in an obvious case
o However, on the facts the evidence was insufficient to support the allegation that the scheme was a colourable device
 To the contrary, the powers were plainly being used to prevent an unfairness to Tasmania or to some/all of its population

Question 33

Facts in the DOGS case (1981)

Answer 33

• s 96 grants were made to the States on condition that the funds were distributed to non‐govt schools, some of which schools were owned and managed by religious institutions, esp the Roman Catholic Church
• DOGS argued that, by providing money to non-government, religious schools, the Cth was in effect bypassing s 116 in order to establish a religion

Question 34

Issue in DOGS case (1981)

Answer 34

Was s 96 being used to bypass s 116 which prohibited the “establishment” of any religion?

Question 35

Outcome in DOGS case (1981)

Answer 35

• Court held that the effect of the legislation was not in fact to establish a religion → merely giving money to religious schools did not breach or bypass s 116 and therefore the grant to religious schools was valid

s 116 actually prohibits the establishment of any particular religion as the formal, national religion

Question 36

Key principles from DOGS Case (1981)?

Answer 36

 A granting Act which has the effect of breaching s 116 or any other positive guarantee of a right in the Constitution will not be tolerated
 s 96 must be considered alongside other constitutional restrictions/freedoms: Barwick CJ

Question 37

Facts in PJ Magennis v Cth (1949)

Answer 37

• The Cth and NSW government formed an agreement whereby the Cth hoped to fund the state’s acquisition of land
• The purpose of the Cth wanting to acquire land but using the States was that the Cth wanted to provide land to reward returned serviceman with a plot of land so that they can become farmers
• Because large tracts of land were sought to be acquired, the Cth would have had to pay just terms under s 51(xxxi)

Question 38

What was the Cth trying to do in Magennis (1949)?

Answer 38

• The Cth was thus hoping to give money to the States by way of grants so that the States would be the ones to acquire the land (and they could acquire it at a lesser rate that the Cth could)
• This would appear to be a colourable device to use the grants power to avoid the just terms requirement under s 51(xxxi)

Question 39

Outcome in Magennis (1949)

Answer 39

• The legislation of the grant was invalid for failing to provide for the acquisition of property on just terms

Question 40

What was key to the outcome in Magennis (1949)?

Answer 40

the characterisation of the Act - majority characterised it as not so much an exercise of the grants power but a law with respect to the acquisition of property and thus requiring compensation to be paid

Question 41

What approach was taken in Magennis (1949)?

Answer 41

Evatt’s approach in Moran - about looking at practical effect of the legislation etc and whether it amounts to a colourable device

Question 42

How can you find reasoning in Evatt’s approach from Moran in dissent vs it being taken on board in Magennis (1949)?

Answer 42

• Unlike in taxation, the HCA will not tolerate the use of the grants power to overcome rights afforded to citizens by the Constitution
• In Moran - was about tax legislation + wasn’t impinging on rights
  vs here was about constitutional right

Question 43

Facts in Pye v Renshaw (1951)

Answer 43

Cth legislation in Magennis was amended so that the administrative agreement btw the Cth and the States for the acquisition of land was not referred to at all in the Cth or the State Act which acquired the land

• agreement remained on foot despite no reference to the agreement

Question 44

Outcome in Pye v Renshaw (1951)

Answer 44

Statutes valid using formalistic approach! Nothing in statute to suggest an attempt to bypass the constitutional limitation
NSW statute said it intends to take effect “unconditioned by a Ct legislation and irrespective of any agreement existing”

Question 45

In Pye v Renshaw (1951) did they adopt a practical analysis or a legal formalistic approach

Answer 45

legal formalistic approach
- decided validity purely on statutes’ face –> nothing to suggest the State acquisition was formally predicted on the Cth arrangement

Question 46

Background in ICM Agriculture v Cth (2009)

Answer 46

Agreement btw Cth and a number of states and territories on national water initiative
- Under Agmt passed National WAter commission Act creating independent statutory body

Question 47

Facts in ICM Agriculture v Cth (2009)

Answer 47

• Project was proposed by the NSW Gov and accpeted by Cth
• funding agmt btw Cth and NSW with both contributing to cost of the project
• a condition of agmt was that States would replace existing water licences w a dif licence
• this meant entitlemets to water under new licence wer eless than entitlements granted in earlier NSW Act

Question 48

What was contended in ICM Agriculture v Cth (2009)

Answer 48

argued the replacement of the licenses involved an acquisition of property that the Cth had acquired through the States on terms that were not just

Question 49

Outcome in ICM Agriculture v Cth (2009)

Answer 49

The legislation was held valid bc change in licence scheme was held not to involve an acquisition of property

Question 50

Did ICM Agriculture v Cth (2009) overrule Magennis decision (which held land acquisition was invalid)

Answer 50

No - HCA in ICM said that if it could be shown there was an acquisition of property (not the case here) and s 96 being used to avoid payment on just terms it would’ve been invalid

Question 51

From ICM Agriculture v Cth (2009) what must be read together?

Answer 51

s 96 and s 51(xxxi) (just as s 96 and s 116 were read together in DOGS case)

Question 52

What did Hayne, Kiefel & Bell JJ in ICM Agriculture v Cth (2009) say about characterisation?

Answer 52

o The practical operation of a law is not irrelevant to characterisation; although the law must be characterised by reference to the rights, powers, liabilities and duties and privileges it creates

Question 53

What did Hayne, Kiefel & Bell JJ in ICM Agriculture v Cth (2009) said:

A law may contravene the constitutional restraint that just terms be provide in the acquisition of property both

Answer 53

directly or indirectly, explicitly or implicitly

Question 54

Would Evatt’s approach in Moran as applied in Magennis be the approach taken today?

Answer 54

YES given the HCA has moved away from formalism towards practical approach in recent years (see e.g. Cole v Whitfield) and so would consider schemes as a whole

cf the legalstic ‘on its face approach of pye v renshaw’

Question 55

When looking at whether s 96 breaches and prohibitions within s 51 what’s the approach?

Answer 55

Very much depends on circumstances of the case

see eg s 51(xxxi) and whether its requirements can be avoided depends on this –> see eg ICM

Question 56

When looking at whether s 96 breaches and prohibitions contained outside of s 51, especially those which grant express rights, what’s the HCA’s appraoch?

Answer 56

eg, s 116, the High Court has indicated that it will take a strict view and prevent s 96 being used to circumvent such rights. (see DOGS case which stated this)

Question 57

How do you reconcile Magennis and Pye v Renshaw

Answer 57

majority in ICM Agricultures determined that Magennis is the better view.

In Pye v Renshaw, Magennis was not said to be overruled and the reason why the Court found it unnecessary to do so is to be found in the “decoupling” effect of the legislation from any Cth agreement