Topic 8-Section 92 and section 90 PDF

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Study Note for examination for the topic of section 92 and 90...

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Topic 8Section

92 and section 90

Objectives After completion of this topic you should be able to: 

describe the troubled history of s 92 case law and analyse the

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political context of this case law; explain the Cole v Whitfield test and apply it to any given factual

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problem; demonstrate an understanding of the significance of the s 92 case

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law which followed Cole v Whitfield and apply principles from this case law to any given factual problem; describe the history of s 90 case law and analyse the political and

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economic context of this case law; explain relevant legal principles from more recent s 90 cases and

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apply them to any given factual problem; demonstrate an understanding of the economic consequences

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of Ha v NSW; 1 and demonstrate an understanding of the environmental implications of the s 90 and s 92 case law.

Introduction Thus far our focus has been upon the Commonwealth’s powers. We have looked generally at s 21, and considered ss 21(i), 51(xx), 51(xxix) and 51(vi) in detail. In the last topic, I introduced two constitutional restrictions upon the Commonwealth’s powers, s 21(xxxi) and the implied freedom of political communication. In this topic, we begin to look at constitutional restrictions upon not only the Commonwealth but also the State governments, and we shall continue to look at constitutional restrictions in the next two topics. In this topic, we focus upon s 92 and s 90.

Section 92 The history of section 92 Section 92 has provided lawyers with entertainment and income for decades. Until 1988, with the landmark decision of Cole v Whitfield, it proved to be a much-litigated section. Michael Coper has pointed out that ‘given the operative words of s 92 are simplicity itself,’ it is difficult to see why the ‘true’ meaning of the section remained elusive for so long. 2 One possible answer lies in the very simplicity of the wording of the section. Coper quotes the then Premier of New South Wales, George Reid, who in the course of constitutional debates, observed that: 3 It is a little bit of laymen’s language which comes in here very well. In fact, lawyers and judges strenuously disagreed over the meaning of this ‘little bit of laymen’s language’ for almost ninety years. Coper comments that: 4 Section 92 is the lawyer’s ultimate cautionary tale, the darkest example of what can go wrong when laymen’s language is used in a legal document. A brief history of s 92 prior to 1988 is provided in the next extract. Textbook Sections 11.10–11.25. Activity 8.1 Explain the difference between the ‘free trade’ and the ‘individual rights’ interpretation of s 92. feedback The free trade interpretation of s 92 required the Court to look at whether the law in question discriminated against interstate trade. The individual rights interpretation of s 92 was much wider. According to this interpretation, s 92

was infringed if a law interfered with an individual’s right to trade. Generallyapplicable restrictions on intra- and inter-state trade alike would be invalid under the second interpretation, but not the first. In his influential work The Politics of the High Court, Brian Galligan analyses the political context of High Court decision making. He focuses in part on the High Court’s interpretation of s 92 and argues that the individual rights theory, which was developed by Dixon CJ, was anchored in the ideology of capitalism. He describes the individual rights theory of s 92 as a ‘private enterprise interpretation’. 5In the following reading, Galligan looks at the application of the individual rights interpretation of s 92 in the Bank Nationalisation case, 6in which the High Court held invalid an attempt by the Chifley government to nationalise the banks. Bank nationalisation, according to Galligan, ‘was one of the greatest challenges to capitalism that has ever occurred in Australia;’ 7it also ‘threatened the sanctity of private property that is the economic foundation of liberal democracy’ 8and the High Court’s response was predictably conservative. Reading 8.1 B Galligan, The politics of the High Court: A Study of the Judicial Branch of Government in Australia (University of Queensland Press, 1987) 163–183. Think Galligan maintains that behind the rhetoric of legalism in High Court judgments was ‘a basic assumption about the meaning of s 92, or a personal preference in favour of private over public enterprise’. 9He argues that ‘judges cannot avoid making political decisions simply by denying that they are doing so and using a language that tends to hide the fact’. 10Do you agree with his position? Would it be preferable, in your view, if judges were more overtly political in their judgments? Why or why not?

Cole v Whitfield – the new theory of section 92

By 1988, when the Court heard Cole v Whitfield, members of the judiciary had expressed a range of emotions, including doubt, disgust and despair, in relation to the ever-shifting and apparently elusive interpretation of s 92. This included Lord Wright of the Privy Council, who had heard one of the early s 92 cases James v Commonwealth 11and was invited to express his viewpoint some twenty years later in the Sydney Law Review. He wrote that:12  If we had really appreciated how difficult it was to amend your Constitution we would no doubt have looked a little harder at that case. The landmark case of Cole v Whitfield heralded a new era in s 92 interpretation. After this decision, which as a unanimous decision is securely entrenched as a precedent, the controversy over different interpretations of s 92 seemed at an end. In the next extract, the facts of the case and the findings of the court are described. Textbook Sections 11.30, 11.35. Activity 8.2 1. What did the Court identify as the true purpose of s 92? 2. What test did the Court establish as the appropriate test for identifying a breach of s 92? 3. Did the Tasmanian law in question infringe s 92? Why or why not? feedback The Court identified as the true purpose of s 92 the elimination of protectionist and discriminatory burdens. The test is set out in four steps on p 410–11. The Tasmanian law in question did not in infringe s 92. It applied to all crayfish, irrespective of where they were caught, including Tasmanian crayfish, and, in any event, had a legitimate non-protectionist purpose of conservation. Was the law on s 92 now clear? James Crawford has commented wryly: 13 Some may have thought that the advent of the new test for section 92 avoided the difficulties of analysis which had dogged the older established tests. It

would be truer to say that it substituted for the old difficulties a new and less familiar set. Garfield Barwick, former Chief Justice of the High Court, took a much more scathing view of Cole v Whitfield. He commented in a 1989 interview:14  It’s really laughable. I’d have great fun appealing from that with the Privy Council. Dear me, it’s terrible tosh, you know.

Applying the new test: Section 92 case law after Cole v Whitfield ‘Cole’s New World’ is Blackshield and Williams’ catchy phrase for the period that followed Cole v Whitfield. In three subsequent cases, the Court applied the new test to legislation which selectively imposed a licence fee on Victorian tobacco retailers but did so as part of a wider scheme, 15to South Australian legislation which disadvantaged producers of beer who did not use refillable bottles, 16and to New South Wales legislation which vested all barley grown in New South Wales in a State Marketing Board. 17These three cases are discussed in the next extract. Textbook Sections 11.40–11.50. Activity 8.3 Which do you find more persuasive – the view of the majority or the view of the minority in Bath v Alston Holdings? feedback The majority felt that a state was imposing a discriminatory burden of a protectionist kind in imposing a burden on imported goods to ensure that such goods did not have a competitive edge over local goods (which were

already subjected to such a burden). The majority held that the fact that there was an equivalent tax on transactions at another point was irrelevant. This reasoning can be seen as somewhat artificial given that, in the context of the wider scheme, a non-discriminatory tax was being imposed on all first sales of tobacco in Victoria. The minority held that the burden was not protectionist because it was part of this wider scheme, which ensured that all tobacco sold in Victoria, irrespective of its point of origin, attracted a fee only once. Michael Coper has written: 18 The majority would be right, I think, only if the so called equalising burden could truly be seen as materially different or different in kind from the local burden it was said to neutralise, rather than as an extension of materially the same burden from one applicable only to a local product to one applicable to local and imported products alike. Joseph and Castan also prefer the minority view as more logical and, in its focus on substantive effects, more compatible with the reasoning in Cole v Whitfield. 19 Activity 8.4 Why did the legislation in Barley Marketing Board v Norman survive? feedback The legislation, which vested all barley grown in New South Wales in the State’s Barley Marketing Board, was not in breach of s 92 because all purchasers of barley (both interstate and New South Wales purchasers) were treated the same. However legislation which imposed a burden on interstate buyers which was not shared by intrastate buyers would infringe s 92. Coper points out that this case ‘leaves other aspects of statutory marketing schemes to another day’. 20For instance, legislation which vested in a statutory board the whole of a commodity within a state (rather than the whole of a commodity produced within a state) might discriminate in effect against outof-state interests. 21A state monopoly scheme could well discriminate in favour of intrastate trade and against interstate trade in its overall economic impact. Gerard Carney has concluded that: 22

It is evident that in determining whether a commodity marketing scheme which acquires both the locally produced and out of State commodity infringes section 92, much will depend upon the economic evidence presented to the Court. Activity 8.5 What legal principles can be derived from the Castlemaine Tooheys case? feedback In that case, the Court held that the legislation was discriminatory and protectionist although on its face it did not discriminate between South Australian and interstate beer producers. The Court looked at the practical effect of the law in determining whether a discriminatory burden of a protectionist kind was imposed. Furthermore, it was not necessary to establish that all interstate traders were discriminated against – one (Victorian) interstate producer of beer used refillable bottles and therefore benefited from the legislation. The Court held that some discriminatory and protectionist laws will be saved if they are appropriate and adapted to achieving a non-protectionist purpose (here, that of conservation and litter control). However this legislation failed to meet the proportionality test. Note that Gaudron and McHugh JJ phrased the test somewhat differently and talked about the relevance and irrelevance of the distinction between the subject matter of interstate trade and the subject matter of intrastate trade. Textbook Section 11.65. In this extract, Joseph and Castan set out some of the relevant principles with respect to discrimination which can be derived from the cases discussed above. It is important to note that in the shift from an individual rights interpretation of s 92 to a free trade interpretation, one significant effect is that Commonwealth laws will now be less vulnerable than State laws. 23 Textbook Section 11.60

In Betfair Pty Ltd v Western Australia [2008] HCA 11, the Cole v Whitfield test was applied to invalidate provisions in Western Australian legislation which prohibited betting with a betting exchange, insofar as these provisions applied to an interstate betting exchange which accepted bets from Western Australia by telephone or internet, and accepted bets on Western Australian races. The majority judges held that the relevant prohibitions were not necessary for ‘the protection or preservation of the integrity of the racing industry’ 24and, even, if that object were legitimate, the prohibition of such betting was not an appropriate and adapted means to achieve such an object. 25The judges identified ‘practical and conceptual difficulties’ in each state trying to retain its ‘own economic centre’ in the context of internet commerce. 26As George Williams put it, in this decision ‘the inexorable logic of s 92 [met] the internet’. 27However in Sportsbet Pty Ltd v State of NSW and ors [2012] HCA 13, the Court held that NSW legislation which regulated the use of information in relation to horse races in NSW and imposed fees which depended upon an organisation’s wagering turnover did not infringe s 92, as both intrastate and out of state competitors received the benefit of wagering turnover thresholds and paid the requisite fees. Consequently, the legislation did not impose a discriminatory burden of a protectionist kind.

Freedom of inter-state intercourse Note that thus far we have focused on the significance of the freedom of trade and commerce for the purposes of s 92. The other aspect of s 92 protects freedom of inter-state intercourse. The extent to which the movement of persons and ‘things’ across borders is protected by the section has been addressed in a few cases, which are discussed in the next reading. Textbook Section 11.75. In APLA v Legal Services Commissioner (NSW), 28the majority judges rejected the plaintiffs’ arguments that a Regulation which prohibited the advertisement of legal services in personal injuries claims contravened s 92 by

restricting the freedom of interstate intercourse. They concluded that ‘the effect of the prohibition on interstate communications is no greater than is reasonably required to achieve the object’ of the Regulation. 29 Note the summary of a three step test for determining a breach of the guarantee of free interstate intercourse, on page 433 of your text. The Court was required to consider this aspect of section 92 in 2020, when the State of Western Australia refused entry to billionaire Clive Palmer during the COVID-19 pandemic. Palmer instigated a lawsuit on the basis that the closures unreasonably limited the freedom of intercourse. The High Court found against him in November, with the five judges handing down their judgments in February 2021 30. All five judges held that the relevant sections 31 of the Emergency Management Act 2005 (WA), pursuant to which border closure directions had been made by the State Emergency Coordinator, were valid. In determining the validity of these legislative sections, they drew attention to the temporal restrictions on declared states of emergency, and the statutory requirement that the Minister for Emergency Services must be satisfied of the occurrence or imminence of an emergency, and the need for extraordinary measures. 32 These were, in Justice Gageler’s words, ‘critical constraints’, 33 which ensured that ‘the differential burden’ on interstate intercourse met ‘the requisite standard of reasonable necessity’. 34 Justice Edelman, however, emphasised that not every hypothetical application of these emergency powers would be constitutionally valid. 35 A majority endorsed a test of structured proportionality: considering whether there is a rational connection between the law and a legitimate purpose, whether the means are reasonably necessary, and whether the law is adequate in its balance.

Section 90 This section has proved to be a formidable constraint upon the fiscal powers of the States. In its definition of what constitutes an excise duty, the High Court has effectively stripped the States of much of their revenue-raising capacity. The lack of unanimity in relation to what constitutes an excise duty and the confusion in the case law over technicalities have contributed to the

complexity of s 90 case law. While the most recent decision, Ha v New South Wales, has ensured that some of the previous anomalies in this case law no longer apply, there is still no unanimity on whether the term ‘excise duty’ should be given a narrow or wide interpretation. An excise duty is a type of tax. The distinction between excise duties and other categories such as fees for a service, fees for a privilege or a licence, charges and penalties is discussed in the next extract. Textbook Section 9.10.

The early cases The question of when a tax amounts to an excise duty is a complex question and the High Court judges have disagreed on the answer to this question. In the following reading, you will find a discussion of the earlier case law. You should notice that the original ‘narrow’ approach to what constitutes an excise duty was progressively modified by the Court in this early sequence of cases. Textbook Sections 9.15–9.25. Activity 8.6 Set out the narrow definition of excise duty as defined by the Court in Peterswald v Bartley 36and the wide definition as defined by the Court in Parton v Milk Board (Vic). 37 feedback The narrow definition of an excise duty is that it is a duty analogous to a customs duty, imposed upon goods either in relation to quantity or value when produced or manufactured and not in the sense of a direct or personal tax.

According to the wide definition, an excise duty is a tax imposed on goods at any point on its way to the consumer – including taxes on the distribution or sale of a commodity. The wide view, as developed in these early cases, had serious financial ramifications for the States and consequently there evolved two categories of exceptions, the so-called ‘backdating device’ and consumption taxes, which are explained in the next extract. The difficulty in effectively applying consumption taxes has discouraged the States from taking advantage of this particular exception to increase their revenue. However, this has not been the case with the backdating device. Textbook Sections 9.30–9.40. Activity 8.7 Set out the characteristics which a State fee had to have to fall within the ‘criterion of liability’ exception developed in Dennis Hotels v Victoria. 38 feedback The fee must be described as a fee for a business licence, calculated by reference to the quantity of goods sold in a prior period. Note that this very legalistic exception was applied by the Court with some reluctance in the cases which followed Dennis Hotels. Why, therefore, did the Court continue to apply the exception? Mason J explains the Court’s reasons in the following passage: 39 It would, I think, lead to great uncertainty in government and commerce if the court were now to hold that [the earlier cases] were wrongly decided. Such a course would disturb legal and financial arrangements made on the faith of the existing decisions of this court. The Court did however confine the exception to fees which were calculated by reference to sales in a previous period. Licence fees calculated by reference to steps in the production of goods, albeit steps undertaken in a previous period, were excise duties. 40

The modern cases The wide approach In recent years, the Court has increasingly tended to adopt a practical approach and consider the substantive effects of a fee. The development of this approach, and the Court’s eventual abandonment of the ‘backdating device’, is explained by Joseph and Castan. Textbook Sections 9.45–9.65. Activity 8.8 What position did the majority judges take in Ngo Ngo Ha v New South Wales? feedback They adopted the wide approach to excise duties but rejected the ‘backdating’ device exception (without actually overruling Dennis Hotels and Dickenson’s Arcade v Tasmania). 41They rejected the views of Mason CJ and Deane J in Philip Morris 42that tobacco and alcohol were in a special category for the purposes of the ‘backdating device’. They fa...