Legal Briefing No. 36

Number 36

30 August 1997

THE COMMONWEALTH'S IMPLIED
CONSTITUTIONAL IMMUNITY FROM STATE LAW

On 12 August 1997 the High Court handed down its decision
in Re The Residential Tenancies Tribunal of New South Wales
and Henderson; Ex parte Defence Housing Authority ('Henderson')
(No. S75 of 1996). The decision has important implications
for activities conducted in the States by the Commonwealth
and its agents. This briefing summarises the issues raised
in the case, but focuses on the matter of principal significance,
the Commonwealth's implied constitutional immunity from
State law.

The Facts

Mr Henderson was the owner of a house which was leased
by the Defence Housing Authority ('the DHA') pursuant to
its statutory functions under the Defence Housing Authority
Act 1987 ('the DHA Act') to provide accommodation for
defence personnel. Various disputes arose between Mr Henderson
and the DHA concerning the application of the Residential
Tenancies Act 1987 (NSW) ('the NSW Act') to the lease.

Landlord's Rights of Access

The NSW Act provided that it was a term of every residential
tenancy agreement that the landlord may enter the residential
premises to inspect them, on not more than four occasions
in any period of 12 months, if the tenant has been given
not less than 7 days' notice on each occasion. The NSW
Act provided that on the application by a landlord under
a residential tenancy agreement, the NSW Residential Tenancies
Tribunal ('the NSW Tribunal'), which is established by
the NSW Act, may 'make an order authorising the landlord
or any other person to enter the residential premises'.

It was a further term of every residential tenancy agreement
that a copy of the key required to open a lock which has
been altered shall be given to the other party, except
where the other party consents to not being given a copy
of the key or the NSW Tribunal authorises a copy not to
be given. On the application by a landlord under a residential
tenancy agreement, the NSW Tribunal was empowered, if it
was satisfied that it was reasonable in the circumstances
to do so, to make an order requiring a copy of the key
to be given to the landlord.

Mr and Mrs Henderson sought orders from the NSW Tribunal
requiring the DHA to allow the owner to enter the premises
for the purpose of inspection and give the owner a key
to the premises.

Response by DHA

In response the DHA maintained that it was not bound by
the NSW Act. In the proceedings before the High Court,
the DHA sought writs of prohibition restraining the Hendersons
and the NSW Tribunal from proceeding further with the matters
before the Tribunal. The DHA relied on the following grounds:

  • The NSW Act, in so far as it purported to apply to
    the DHA, was inconsistent with the DHA Act and was therefore
    invalid under s.109 of the Constitution.
  • The NSW Act, in so far as it purported to apply to
    the DHA, was invalid because it deals with matters within
    the exclusive power of the Commonwealth Parliament under
    s.52(ii) of the Constitution - specifically the power
    with respect to matters relating to the former State
    departments of 'naval and military defence', control
    of which passed to the Commonwealth under s.69 of the
    Constitution.
  • The NSW Act cannot apply to the DHA because of the
    constitutional immunity which the Commonwealth enjoys
    from State laws.
  • Section 64 of the Judiciary Act 1903 did not
    operate to subject the DHA to the orders sought under
    the NSW Act.

The Decision

By a 6:1 majority (Brennan CJ, Dawson, Toohey, Gaudron,
McHugh and Gummow JJ; Kirby J dissenting) the Court held
that the DHA is subject to the NSW Act.

Inconsistency

The Court (Kirby J dissenting) rejected the DHA's contention
that the NSW Act, in its purported application to leases
between the DHA and private lessors, was inconsistent with
the DHA Act for the purposes of s.109 of the Constitution.
There were no provisions in that Act which showed an intention
to exclude the application of State tenancy laws.

Section 52(ii) of the Constitution

The Court (Kirby J dissenting) rejected the argument that
the Commonwealth Parliament's exclusive powers under s.52(ii)
of the Constitution precluded the NSW Act from applying
to the DHA. That provision confers an exclusive power on
the Commonwealth Parliament to make laws with respect to
matters relating to departments of the public service transferred
to the Commonwealth by the Constitution. The majority held
that the intention underlying s.52(ii) was confined to
ensuring that State laws did not follow the persons or
property of a department of the State public service which
was transferred by the Constitution into the Commonwealth
public service. On this view, the force of s.52(ii) is
largely spent.

Commonwealth Immunity from State Law

By a 6:1 majority (McHugh J dissenting) the Court rejected
the broad proposition that the Commonwealth cannot be bound
by State legislation. However, by a 6:1 majority (Kirby
J dissenting) it also rejected the argument that the Commonwealth's
constitutional immunity from State law is no greater than
the immunity which the States enjoy from Commonwealth law.

Section 64 of the Judiciary Act 1903

Because of their conclusion that the NSW Act applied to
the DHA, it was unnecessary for Brennan CJ, Dawson, Toohey,
Gaudron, McHugh and Gummow JJ to determine whether s.64
operated, although Dawson, Toohey and Gaudron JJ doubted
that the proceedings in the NSW Tribunal constituted a
suit for the purposes of s.64. For similar reasons, McHugh
and Gummow JJ held that s.64 was inapplicable. Kirby J
also held that s.64 was inapplicable. Section 64 provides
that in any 'suit' to which the Commonwealth or a State
is a party, the rights of parties shall as nearly as possible
be the same as in a suit between subject and subject. It
should be noted that the effect of s.64, as interpreted
in Commonwealth v Evans Deakin Industries (1986)
161 CLR 254, is that a wide range of State laws may apply
to the Commonwealth.

Commonwealth Immunity

'Executive Capacities of the Crown'

In defining the scope of Commonwealth immunity, Dawson,
Toohey and Gaudron JJ (in a joint judgment) drew a distinction
between 'the capacities of the Crown on the one hand, by
which we mean its rights, powers, privileges and immunities,
and the exercise of those capacities on the other' (p.18).
Section 61 of the Constitution is the source of the rights,
powers, privileges and immunities of the Crown in right
of the Commonwealth. Dawson, Toohey and Gaudron JJ stated
that the purpose in drawing this distinction 'is to draw
a further distinction between legislation which purports
to modify the nature of the executive power vested in the
Crown - its capacities - and legislation which assumes
those capacities and merely seeks to regulate activities
in which the Crown may choose to engage in the exercise
of those capacities' (p.19).

In a separate judgment, Brennan CJ drew a similar distinction
between 'the capacities and functions of the Crown in right
of the Commonwealth and the transactions in which that
Crown may choose to engage in exercise of its capacities
and functions' and added: '[b]y "capacities and functions" I
mean the rights, powers, privileges and immunities which
are collectively described as the "executive power of the
Commonwealth" in s.61 of the Constitution' (p.1).

State Law Cannot Restrict Executive Capacity

In the view of Dawson, Toohey and Gaudron JJ, State law
cannot restrict or modify the executive capacities of the
Commonwealth (p.20), but a State law of general application
can operate to regulate activities which the Commonwealth
chooses to undertake, for example, entering into contracts
(pp.22-23). According to Dawson, Toohey and Gaudron JJ,
the reason why State law is incapable of affecting the
executive capacity of the Commonwealth is that, in contrast
to the Commonwealth, the States do not have specific legislative
powers which might be construed as authorising them to
restrict or modify the executive capacities of the Commonwealth:
'the character of the Commonwealth as a body politic, armed
with executive capacities by the Constitution, by its very
nature places those capacities outside the legislative
power of another body politic, namely a State, without
specific powers in that respect' (p.20). Their Honours
held that, to the extent (if any) that the DHA was exercising
the Commonwealth's executive capacity, the NSW Act 'neither
alters nor denies that capacity notwithstanding that it
regulates its exercise' (p.29).

Accordingly, there was no constitutional objection, on
the basis of Commonwealth immunity, to the NSW Act applying
to leases entered into by the DHA. Brennan CJ reached the
same conclusion and stated that '... there is no reason
why the Crown in right of the Commonwealth should not be
bound by a State law of general application which governs
transactions into which the Crown in right of the Commonwealth
may choose to enter. The executive power of the Commonwealth,
exercised by its choice to enter the transaction, is not
affected merely because the incidents of the transaction
are prescribed by a State law' (p.4).

Crown Immunity from Laws of General Application

Dawson, Toohey and Gaudron JJ affirmed that neither the
Crown nor its agents enjoy any special immunity from the
operation of laws of general application, State or federal
(p.24). In their Honours' view, such a notion was not to
be found in previous decisions of the Court such as Commonwealth
v Cigamatic Pty Ltd (In Liquidation) (1962) 108 CLR
372 and was contrary to the rule of law.

Their Honours specifically rejected the views expressed
by Fullagar J in The Commonwealth of Australia v Bogle (1953)
89 CLR 229 that a State was incapable of enacting legislation
which is binding upon the Commonwealth (p.26). In this
regard, their Honours referred, with apparent approval,
to the decision in Pirrie v McFarlane (1925) 36
CLR 170 (p.24). In that case a person acting in the execution
of his duties as a member of the Royal Australian Air Force
was held to be bound by the provisions of a Victorian Act
requiring him to hold a driver's licence when driving a
vehicle on a public highway in the course of those duties.

On the other hand, Gummow J appeared to draw a distinction
between the Crown and its agents in stating that Pirrie
v McFarlane 'may be understood as a case where the
State legislation bound, by criminal sanction, individual
members of the Defence Force rather than the Executive
Government of the Commonwealth' and, on that basis, his
Honour held that it was correctly decided (p.61). Brennan
CJ expressed a similar view (p.5).

McHugh J rejected the majority's distinction between the
executive capacities of the Commonwealth and the exercise
of those capacities. His Honour could not see 'any constitutional
rationale for a doctrine that would hold, for example,
that the States cannot prevent the Commonwealth from entering
into a specific class of contract but can alter the legal
rights and obligations of the Commonwealth and the subject
once they have entered into a contract of that class';
moreover, McHugh J noted that 'the distinction between
a capacity of the Commonwealth and its exercise is not
easily drawn' and observed that 'it is not a distinction
which I find illuminating in this constitutional context'
(p.38). Gummow J (p.60) and Kirby J (p.104) agreed with
McHugh J that the distinction lacked utility.

McHugh J held that the Commonwealth could not be bound
by State law thus supporting the broad view of Commonwealth
immunity identified by Fullagar J in Commonwealth v
Bogle. However, his Honour found against the DHA on
the ground that it was not a body which enjoyed the Commonwealth's
constitutional immunity.

Gummow J made several observations in relation to Commonwealth
immunity but did not define with any precision the outer
limits of that immunity. It was not necessary for Gummow
J to do so because, like McHugh J, he held that the DHA
did not enjoy the immunity of the Commonwealth. The narrow
view which these two Justices took of which bodies constitute
the Commonwealth for the purposes of constitutional immunity
is potentially significant. (Brennan CJ, Dawson, Toohey
and Gaudron JJ assumed, without deciding, that the DHA
was entitled to the Commonwealth's immunities. Kirby J,
it appears, considered that the DHA did enjoy Commonwealth
immunities.)

Kirby J took the narrowest view of Commonwealth immunity,
deciding that the Commonwealth's immunity from State law
was not significantly greater than the States' immunity
from Commonwealth law. He observed that the federal structure
of the Constitution prevented a State Act from singling
out the Commonwealth for discriminatory treatment or impairing
the integrity or autonomy of the Commonwealth (pp.107-8).

Implications for Clients

Commonwealth can be Bound by State Laws

As a result of the decision in Henderson, it is
no longer open to the Commonwealth or its agents to assert
a broad constitutional immunity from State laws. For some
time, the Attorney-General's Department has advised that
the High Court was likely to take a more restrictive approach
to the question of Commonwealth immunity from State laws
than that suggested by Fullagar J in Commonwealth v
Bogle.

Certain State laws of general application are capable
of binding the Commonwealth. In order to determine whether
a particular State law binds the Commonwealth it will still
be necessary to determine whether, as a matter of statutory
construction, the State law is intended to have that effect.
In this regard, it should be noted that in Henderson s.4
of the NSW Act was expressed to bind the Crown 'not only
in right of New South Wales but also, so far as the legislative
power of Parliament permits, the Crown in all its other
capacities'.

In their joint judgment, Dawson, Toohey and Gaudron JJ
referred to the presumption that the Crown is not bound
by the general words of a statute and that the presumption
extends beyond the Crown in right of the enacting legislature
to the Crown in right of the polities forming the federation
(p.25).

The Test to Apply

In the light of Henderson, the test is whether
the State law in question merely seeks to regulate activities
or transactions in which the Commonwealth may choose to
engage in the exercise of its executive capacities. If
it does, and the State law is, as a matter of statutory
construction, applicable to the Commonwealth, the State
law will bind the Commonwealth, unless it is inconsistent
with a Commonwealth law and invalid by reason of s.109
of the Constitution.

The distinction relied upon by Brennan CJ, Dawson, Toohey
and Gaudron JJ may be difficult to apply in particular
situations, and it will require further decisions of the
Court to clarify the circumstances in which the Commonwealth
may be subject to State law. (In this regard, it is significant
that Dawson J has since left the High Court and that Brennan
CJ and Toohey J will be leaving over the next few months.
Of the other four Justices, three have indicated that the
distinction is unhelpful.)

Distinction Between 'Capacities' and the 'Exercise' of
them

The judgments of Brennan CJ, Dawson, Toohey and Gaudron
JJ seem to be concerned with activities carried on in common
with subjects. The judgments do not indicate clearly whether
the Commonwealth can be required by State law to obtain
a licence or approval before undertaking an activity. Arguably,
the effect of prerequisites such as these would be to prohibit
the Commonwealth from undertaking the activity and thus
restrict or modify its executive capacity. Arguably, there
would be no such effect if, in carrying out the activity,
the Commonwealth was required by State law to carry out
the activity in a particular way or to a particular standard.

Application of the distinction between the capacities
of the Crown and the exercise of these capacities will
require consideration on a case by case basis. Until further
elucidation by the Court is given, it is appropriate that
the Commonwealth proceed on the basis that the Commonwealth
is not bound by State legislation which would, in substance,
prohibit the exercise of the capacities of the Commonwealth.

Thus the Commonwealth should assert immunity from State
laws that would prevent the Commonwealth from erecting
a building or using land for a particular purpose. On the
other hand, for example, an obligation arising under a
State building law on the owner of land to observe safety
standards in constructing a building on that land would
probably be capable of binding the Commonwealth. Similarly,
general State laws imposing safety or pollution controls
on the conduct of an activity are probably capable of binding
the Commonwealth.

It may be possible to view such laws as merely seeking
to regulate activities in which the Commonwealth chooses
to engage in the exercise of its executive capacities.
On the Dawson, Toohey and Gaudron JJ approach, this certainly
seems the case. Such a State law is not, however, concerned
with transactions and Brennan CJ may not so readily regard
such a type of law as applicable to the Commonwealth.

Necessity for Legislative Precision

The decision in Henderson emphasises the importance
of s.109 of the Constitution in ensuring the Commonwealth
enjoys a paramount position within its area of legislative
competence. In future, if it is intended that the Commonwealth
carry out activities or enter into transactions without
having to comply with State laws of general application,
Commonwealth legislation will be necessary to ensure the
Commonwealth is unaffected by such laws. Henderson demonstrates
that Commonwealth legislation which merely confers functions
and powers on the Commonwealth, its employees or a statutory
body may not be sufficient to oust State laws for the purposes
of s.109.

The fact that the definition of the 'Commonwealth' may
be limited for immunity purposes to the Commonwealth itself
and core government agencies, points to the importance,
when creating a statutory body, of spelling out precisely
the extent to which the body is intended to be immune from
State laws.

Application to Territories

The High Court did not consider the question whether the
Commonwealth would be bound by a law of a Territory and
the position of the self-governing Territories (except
the Australian Capital Territory) is unclear. In the case
of the ACT, section 27 of the Australian Capital Territory
(Self-Government) Act 1988 provides that, except as
provided by the regulations, an enactment of the ACT does
not bind the Commonwealth.

In the case of the Northern Territory and Norfolk Island,
there is no such statutory restriction and the relevant
Legislative Assemblies are given the general power to make
laws 'for the peace, order and good government of the Territory'.
However, on the approach taken by Brennan CJ, Dawson, Toohey
and Gaudron JJ in Henderson, it seems likely that
a law of the Northern Territory or Norfolk Island which
seeks to regulate activities or transactions in which the
Commonwealth may choose to engage in the exercise of its
executive capacities would be held to be capable of binding
the Commonwealth.

Application of State Criminal Laws

Despite the observations of Dawson, Toohey and Gaudron
JJ (at p.24) to which reference is made above, it is considered
that Henderson does not affect the principle that
the Crown itself cannot be criminally liable for an offence
except in the most exceptional circumstances. However,
this is not to say that a State criminal provision cannot
impose obligations on the Commonwealth; simply that the
criminal sanctions themselves are unlikely to be applicable.

Further Advice on the Case

Henderson leaves considerable uncertainty. It is
suggested that legal advice be sought in relation to areas
of concern. The Australian Government Solicitor is well
placed to advise whether State laws purport to bind the
Commonwealth and if they do, whether or not there is immunity.
Any potential difficulties should also be drawn to the
attention of the AGS in order to assist in further consideration
of the general immunity issue by the Government.

ISSN 1448-4803 (Print)
ISSN 2204-6283 (Online)

The material in this briefing is provided
for general information only and should not be relied
upon for the purpose of a particular matter. Please contact
AGS before any action or decision is taken on the basis
of any of the material in this briefing.

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