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Tuesday, 10 August 1926

Senator McHUGH (South Australia) . - I regret that a bill of such importance as this does not bear the imprimatur of the whole of the States. Three of them favour it, but the three that are opposed to it contain threefourths of the population of Australia.

Senator Elliott - Why say three States are opposed to it?

Senator McHUGH - Victoria we cau say is opposed to it, since the State Government, which represents the people of Victoria, has declared against it. Similarly, the people of South Australia and New South Wales are opposed to the measure. Although State Governments representing three-fourths of the population of the Commonwealth do not want the bill, this Government holds a revolver at the heads of those States, telling them that, whether they accept the measure or not, the tax will be collected from them. South Australia, I suppose, has more motor cars per head of the population than any other State ; but while Western Australia has £336,000 allocated to it, my State will receive a little less than £200,000. Naturally the people of South Australia will want to know why those who use petrol on the roads, and are to be specially taxed, should not be benefited in proportion to their numerical strength. I venture to predict that the bill, which will, no doubt, be passed, will result in endless litigation. The States that oppose it are almost certain to apply to the courts for injunctions restraining the Federal Government from collecting the petrol tax. If the Commonwealth Government had approached the States in a reasonable manner, possibly they would have accepted the scheme.

Senator Thompson - It is difficult to persuade .all the States to accept any proposal.

Senator McHUGH -A compromise could probably have been arrived at, but the Government in its usual dictatorial manner attempted to force the States to accept the scheme. Speaking on the bill of 1925, the Attorney-General (Mr. Latham), who was then a private member, said -

I venture to assert, although I know it will be unpopular to do so, that in passing legislation of this description we are not acting constitutionally. This Parliament has no power to legislate for main roads. . . . The Commonwealth Government has no power to raise a finger to construct main roads. It is only because the Federal Government has more money that it knows how to spend that these grants have been made. If- we were to reduce Commonwealthtaxation, and to confine ourselves to our proper functions, the States would find it easier to raise the money required for their roads.

At that time the Attorney-General expressed an independent opinion, but now he is a member of the Government. I propose to quote the opinion of Mr. F. V. Smith, K.C., of Adelaide, who is an authority on constitutional law.

Senator THOMAS (NEW SOUTH WALES) - Is he not a criminal lawyer ?

Senator McHUGH - He is accepted in South Australia as possibly the greatest constitutional authority in that State. Referring to the present bill, he said -

The effect of the legislation in question is specifically to appropriate moneys to the purposes of constructing new main roads and reconditioning or strengthening existing main roads. It contemplates a complete control in the execution and choice of works by the Commonwealth in all respects other than the subordinate executive part, which is left to the States, which have no further or other control than, if tenders having been let for the works, they became the successful tenderers for the respective works. A perusal of "The Commonwealth Government's Hoad Proposals," which contain details of the scheme, satisfied me that the Commonwealth Government are embarking upon a system of roadmaking, using the States as agents for the execution of the programme.

Senator Thompson - Was not Mr. Smith briefed by the South Australian Government ?

Senator McHUGH - It asked him for his views, and I accept them as his honest opinion. Mr. Smith, further, stated -

In my opinion, the Commonwealth Government have no power to appropriate money for expenditure outside the Federal legislative area. I know of no decision which definitely establishes this view, but it seems to be the the only one compatible with the general scope of the Constitution, and particularly with the preservation of the residuary powers of the States. Chapter IV. of the Constitution, sub tit. " Finance and Trade," passim, clearly indicates the limits of the Commonwealth power of expenditure.

Section 81 provides that all revenue or money raised or received by the Executive Government 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 the Constitution.

This provision connotes two things: - (1) The appropriation is to be for the purposes pf the Commonwealth. In my opinion, this confines and limits the objects of appropriation to those which can be lawfully administered by the Commonwealth. (2) Given valid objects of appropriation the manner of appropriation is restricted to that authorized by the Constitution, that is to say, in conformity with sections 53-57 of the Constitution dealing with the rights and privileges of the two Houses inter se with regard to money Bills. And see also sections 83, 87, 89, and 93.

It follows, therefore, that the Main Roads Development Act 1923-1925, requires for its support that the subject with which it deals must fall within the subjects allotted to the legislative power of the Commonwealth. If I am right as to this there are, as it seems to me, only two powers to which the Act could possibly, by any sort of argument, be referred.. The first of these is the trade and commerce power, s. 51 (pi., 1) and s. 51 (pi. vi.), military defence. As to the trade and commerce power, I think this affords no support to the statute, for it fails to take notice of the necessity for roads of an interstate character, and deals generally with intra-state roads (sections 8 and 9 of the Main Roads Development Act 1923; sections 6 and 7 of the Main Roads Development Act 1925), nor does it limit its application to roads useful to interstate trade. See also regulations 3, 4, 5, and 6 (Statutory Rules, 1923, No. 104)'.

Similarly with regard to military defence the Act and the regulations ignore - indeed, negative - t.lip factor of utility for defence purposes. The regulations clearly disclose the plan of the

Commonwealth Government, at least in part, to open up and develop new country by means and with the aid of the statute (see regulation 4, Statutory Rules 1923, No. 104). I do not see, therefore, how it is possible to defend the Act either by reference to the trade and commerce power or to the military defence power. But I should say that if the Act is to be defended, the Commonwealth Government will rely upon section 96 of the Constitution. This provides that during a period of ten years after the establishment of the Commonwealth, and thereafter until Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.

In my opinion, this provision does not apply to and cannot be used to support the Act, for the following reasons: - (1) The scheme contemplated by the Act is not intended as " financial assistance " to the States as such. It embodies the Commonwealth's own policy, and is thrust upon the States against their will. Section 96 contemplates a State in need of and willing to accept " the financial assistance." If and so far as it does yield financial assistance to the States, this is merely incidental to the main purpose of the Act. (2) The section cannot be used, alio intuitu, so as to permit the Commonwealth to encroach upon the powers- left to the State. And if the course pursued can be justified as regards roadmaking, .it is not easy to see where the line can be drawn beyond which the Commonwealth may not transgress. It may, e.g., invade the field of education, housing, agricultural settlement, or any other purely State topic under cover of "financial assistance." (3) It may be said that the financial assistance may be refused; that its acceptance only requires the voluntary assent of the States. But this is more plausible than sound, since the money to be raised to administer the scheme is drawn by the Commonwealth from all the people of the various States, so that any State which refused the " financial assistance " would still be bound to yield in taxation sums of money to be spent in other States which accepted the proposals. The scheme, therefore, is a mere simulacrum of voluntary agreement so far as the individual States are concerned. (4) Moreover, the scheme shows that the expenditure of the money is irrespective of the financial needs of the various States. Its allocation follows a stereotyped formula, and is distributable among all the States whether necessitous or otherwise. In short, it is a device to execute works outside the ambit of Federal power by the agency of the States, who have no voice in the application of the " financial assistance " except as an echo of the Federal command. (5) Lastly, the terms and conditions upon which the financial assistance is provided are those which " Parliament thinks fit " to exact. No doubt Parliament may delegate its powers to a Minister in an appropriate case and where no contrary intention appears. (Baxter versus Ah Way, 8 C.L.R., p. 26). But I am disposed to think that on the true construction of this section the terms and conditions are those which Parliament itself declares, and not such as may be left to the discretion of the Minister. 5134 Federal Aid . [SENATE.] Roads Bill.

I am accordingly of opinion that the Main Roads Development Act 1923-1025 is ultra vires. In my opinion, a suit may be instituted by the State of South Australia for appropriate declarations, challenging the Act and the appropriations made under it, and for an injunction forbidding the appropriations and their application to the disclosed object.

Senator THOMAS (NEW SOUTH WALES) - Does the honorable senator think that, in the event of litigation, Mr. Smith, K.C., would be prepared to accept a brief from the Commonwealth Government to prove that the legislation is constitutional?

Senator McHUGH - I do not know; but I am of the opinion that members of the legal profession are at all times prepared to plead in the cause of justice. I understand that they take an oath to that effect when they are admitted to the Bar. If the South Australian Government desires to retain Mr. Smith-

Senator THOMAS (NEW SOUTH WALES) - I was referring to the Commonwealth Government. '

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