Attorney-General for the State of Victoria v Andrews & Ors [2006] HCATrans 355 (1 August 2006)

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Attorney-General for the State of Victoria v Andrews & Ors [2006] HCATrans 355 (1 August 2006)

Last Updated: 1 August 2006

[2006] HCATrans 355

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M83 of 2005

B e t w e e n -

ATTORNEY-GENERAL FOR THE STATE OF VICTORIA

Appellant

and

KEVIN JAMES ANDREWS, MINISTER FOR EMPLOYMENT AND WORKPLACE RELATIONS

First Respondent

MEMBERS OF THE SAFETY, REHABILITATION AND COMPENSATION COMMISSION

Second Respondent

OPTUS ADMINISTRATION PTY LTD

Third Respondent

VICTORIAN WORKCOVER AUTHORITY

Fourth Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 1 AUGUST 2006, AT 10.16 AM

Copyright in the High Court of Australia

__________________

MS P.M. TATE, SC, Solicitor-General for the State of Victoria: May it please the Court, I appear with my learned friend, MR M.K. MOSHINSKY, for the appellant. (instructed by Victorian Government Solicitor)

MR D.I. STAR: If the Court pleases, I appear on behalf of the first and second respondents. (instructed by Australian Government Solicitor and Phillips Fox)

MR P.J. HANKS, QC: Your Honours, I appear with MS R.J. ORR for the fourth respondent. (instructed by Corrs Chambers Westgarth)

MR D.M.J. BENNETT, QC, Solicitor-General of the Commonwealth of Australia: If your Honours please, I appear with my learned friend, MR D.I. STAR, for the Attorney-General of the Commonwealth intervening. (instructed by Australian Government Solicitor)

MR R.J. MEADOWS, QC, Solicitor-General for the State of Western Australia: May it please the Court, I appear with my learned friend, MR R.M. MITCHELL, intervening on behalf of the Attorney-General for Western Australia in support of the appellant. (instructed by State Solicitor’s Office (Western Australia))

MR M.G. SEXTON, SC, Solicitor-General for the State of New South Wales: If the Court pleases, I appear with my learned friend MR M.J. LEEMING, for the Attorney-General for New South Wales who intervenes in the proceedings. (instructed by the Crown Solicitor for the State of New South Wales)

MR C.J. KOURAKIS, QC, Solicitor-General for the State of South Australia: If the Court pleases, I appear with my learned friends, MR S.A. McDONALD and MR J-A. LAKE, for the Attorney-General for South Australia, intervening in support of the appellant. (instructed by the Crown Solicitor’s Office (South Australia))

GLEESON CJ: Yes, Solicitor-General for Victoria.

MS TATE: May it please the Court. Might I indicate at the outset that there has been an agreement between the parties and interveners on a division of time for the delivery of submissions within this matter with the intention of ensuring that the matter can be completed by 4.15 today.

GLEESON CJ: I feel an obligation of disclosure to you.

MS TATE: Yes, your Honour.

GLEESON CJ: As the result of what has happened to tomorrow’s case, you should not feel too oppressed by that necessity.

MS TATE: We are grateful for that indication, your Honour. Your Honours, this case raises for the first time in this Court the question of the meaning and scope of the express restriction on Commonwealth legislative power to be found in section 51(xiv) of the Constitution. If I might refer your Honours to that section, 51(xiv) consists of two limbs. It provides that the Commonwealth Parliament:

shall . . . have power to make laws . . . with respect to . . .

Insurance, other than State insurance; also State insurance extending beyond the limits of the State concerned:

The first limb contains the express restriction “other than State insurance”. It is the meaning and scope of that restriction and thus the meaning and scope of the expression “State insurance” which lies at the heart of this case. Your Honours, before I turn to the legislation might I indicate in summary form the scope of the dispute in this proceeding and the propositions for which we shall contend.

KIRBY J: Can I just ask a question on your first point about analysis. Optus in Victoria is part of the corporation Optus throughout the Commonwealth and internationally.

MS TATE: Yes, your Honour.

KIRBY J: The Compensation Act (Vic) presumably contains extraterritorial provisions applying to Optus as an employer in Victoria. Is there therefore any question of the extent to which that obligation takes Optus into the second limb?

MS TATE: No, your Honour, there has been no issue raised with respect to that.

KIRBY J: But that would conceivably, potentially, be raised would it not, because compensation statutes in Australia typically cover employees who are sent overseas, and in a case of an employer like Optus presumably that is not a theoretical possibility.

MS TATE: Well, your Honour, it is actually section 80 of the Accident Compensation Act which provides the nexus with Victoria. There it is required that the employment - - -

GLEESON CJ: Just a minute, section 80?

MS TATE: It is section 80, your Honour, and that is to be found at page 153 of the reprint. Subsection (1) provides that:

There is no entitlement to compensation under this Act other than in respect of employment that is connected with this State.

It then goes on to say under subsection (3) that:

A worker’s employment is connected with –

(a) the State in which the worker usually works in that employment; or

(b) . . . the State in which the worker is usually based for the purposes of that employment; or

(c) . . . the State in which the employer’s principal place of business in Australia is located.

So the nexus is one which can be satisfied by an extended connection but, your Honour, there has been no issue raised by the Attorney-General for the Commonwealth or any of the other respondents that insofar as section 80 depends upon the nexus which is so extensive that it therefore is supported by the grant of power under the second limb of section 51(xiv).

KIRBY J: I noted that there is no point raised and it was just a puzzle to me because of the fact that that nexus in the Victorian statute, which is not an unusual one - - -

MS TATE: No, indeed, your Honour.

KIRBY J: - - - would nonetheless mean that the State insurance extended in its operation of indemnity to an employer like Optus beyond the limits of the State concerned and at some stage maybe we will have to think about what relevance, if any, that has. We cannot, in construing a constitutional provision, it seems to me, completely disjoin that reality from the question which we are asked to answer.

MS TATE: Except that, your Honour, the Court of course is not constrained by the issues that are raised by the parties or the submissions on those issues raised by the parties on the constitutional question, but perhaps it is a matter for reflection with the Commonwealth Attorney.

Your Honours, might I then proceed to give an indication of the summary of the overall argument. It is our submission that the effect of what we have described as the impugned provisions – and I will take your Honours to those provisions later – but the effect of the impugned provisions of the Safety, Rehabilitation and Compensation Act (Cth) is to dissolve an obligation which would otherwise exist under State law for employers in Victoria to insure with the Victorian WorkCover Authority in respect of both their liabilities under the Accident Compensation Act to compensate employees for injury and loss, and to ensure their liabilities at common law and otherwise. So the effect of those Commonwealth laws is thus to remove a requirement imposed by the State for compulsory insurance with the State.

It is our submission that the Commonwealth laws are beyond power because, in dissolving that obligation to insure with the State insurer, those laws are laws with respect to State insurance. They thus infringe the restriction in 51(xiv).

KIRBY J: Could I just ask there – and I realise you cannot perhaps answer it immediately – but could one not characterise the Victorian law as a law with respect to two subjects, that is to say, workers’ compensation coverage and insurance in respect of such persons who are subject to workers’ compensation coverage and therefore that one would confine the insurance aspect to the particular aspect of indemnity, not the obligation to get coverage in the first place.

MS TATE: We would say, your Honour, that the two pieces of Victorian legislation which is the Accident Compensation Act (Vic) and the Accident Compensation (WorkCover Insurance) Act (Vic), what we have described as the State Insurance Act, are interconnected pieces of legislation - it is prescribed that they are to be read under section 5 of the State Insurance Act as though they were one Act - in that they provide for a whole scheme, if you like, of workers’ compensation insurance.

KIRBY J: Does that arise out of the very need to get a pool of premiums from employers to fund the nature of this type of universal insurance?

MS TATE: Well, the employers are obliged to pay premiums to a State insurer and those premiums are placed in a fund and it is out of that fund that the compensation is paid and that damages are paid if common law proceedings are brought, your Honour. So, yes, in that sense, your Honour, that is part of the basis of the connection.

CALLINAN J: Any intrusion would have a real tendency to dislocate the whole scheme because insurance involves averaging of a kind.

MS TATE: Indeed, your Honour.

CALLINAN J: So an impact upon any substantial insurer who would otherwise be obliged is bound to have a big impact upon other insurers.

MS TATE: Indeed, your Honour.

KIRBY J: One gets an impression from the historical material you provided us with, going back to the Bismarckian moves towards social insurance in Germany during the 1890’s and before, that the trade-off to establishing forms of social insurance like workers’ compensation was its universality of cover to provide the pool of premium income that was necessary in order to fund it equitably and efficiently over the whole body of the workforce.

MS TATE: Yes, your Honour. Your Honours, there is no contest between the Commonwealth and ourselves as to the definition of “State insurance”. It is accepted that it can be defined in a manner comparable to the definition of “State banking” given by this Court in Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276 at 284, as:

the business of banking conducted by a bank owned or controlled by a State.

So similarly “State insurance” is to be defined as the business of insurance conducted by an insurer owned or controlled by a State, and that is accepted by the Commonwealth at paragraph 26.2 of their submissions.

It is common ground between us that the principles in relation to State banking apply equally and generally to State insurance, and the Commonwealth has accepted that at paragraph 8.1 of their submissions. It is also not in contest that the Victorian WorkCover Authority is an emanation of the State, and the Commonwealth has accepted that proposition at paragraph 8.2 of its submissions.

KIRBY J: Somewhere in your submissions you have to grapple with the Commonwealth’s contention that the error in your approach is indicated by the very existence of the Commonwealth Bank of Australia, that it existed, it exists notwithstanding the constitutional provision with respect to banking, and similarly you cannot, as it were, stop the federal Government and Parliament from providing for a federal authority can exist under the federal head of power.

MS TATE: Indeed, your Honour. Of course we accept that the Commonwealth can provide its own federal insurer should it wish to do so.

GLEESON CJ: Is it your submission that the States could socialise banking?

MS TATE: Your Honour, it is our submission that the States could impose an obligation upon those within the State to insure with the State exclusively with respect to all classes of insurance - - -

GLEESON CJ: Or to bank with the State exclusively?

MS TATE: Yes, your Honour. The Commonwealth responds - - -

KIRBY J: It is back to the Bank Nationalisation Case except on a State level.

MS TATE: Within the boundaries of the State, your Honour.

KIRBY J: Not a very happy prospect.

MS TATE: That may be so.

GUMMOW J: Have you looked at the cases referred to in footnote 54 of South Australia’s submissions - United States pre-1900 decisions - Paul v Virginia and Liverpool Insurance Co v Massachusetts?

MS TATE: Your Honour, perhaps if I could respond to that more fully at a later date. We have found limited utility in any United States jurisprudence, your Honour. But perhaps if I could first of all - - -

GUMMOW J: They suggest that these expressions were introduced for quite a different reason, that it was all bound up with a limited view of the trade and commerce power and the dormant commerce clause. Anyhow, I will not go any further.

MS TATE: Your Honour, we have not sought to adopt South Australia’s submissions generally and there may be differences in the way in which we construe Bourke in particular.

GUMMOW J: A question is: does State insurance mean insurance in a geographical sense?

MS TATE: It is within the boundaries of the State geographically, your Honour.

GUMMOW J: Bourke seems to suggest it does not, that the banking is - somehow the State is banker. Here everyone seems to agree the insurer is the State and then you have this geographical addition which is incongruous.

MS TATE: Your Honour, it is not our contention that the State could control all insurance within the State. We are concerned with the business of insurance conducted by a State insurer as insurer. Just as in the Bank Nationalisation Case, it was clear the distinction was made not the State as customer of banks but the State as banker. Here we would say the State as insurer, not the State as the customer of the insurer or in any other way.

GUMMOW J: These pre-1900 situations you refer to including Bismarck’s initiatives, they required compulsory insurance but they did not require the one insurer. I am sure the German State was not the only insurance company in Germany.

MS TATE: In Germany that is not so, and I will take your Honours to the historical materials. In Norway they did have a State institution which was the exclusive insurer with respect to compulsory insurance for workers’ compensation liabilities.

GUMMOW J: I do not think Norway was in the forefront of anyone’s mind in 1900.

MS TATE: No, I understand that, your Honour, but - - -

GUMMOW J: It was just an outer reach of Sweden.

MS TATE: But throughout the other parts of the other countries within Europe, it was not the case that there was a single State insurer; one accepts that. But perhaps I might just frame the dispute, your Honour, in this way, that - - -

GUMMOW J: Well, hence the importance of the Chief Justice’s question about nationalisation and the socialist structure.

MS TATE: Yes, your Honour. Perhaps I can return to that further, your Honour. The significance of it might become more apparent within the course of the submissions. But having set out for your Honours essentially what is the nub of our submission in relation to the impugned provisions, might I then indicate what is the Commonwealth’s response to those submissions.

KIRBY J: Just before you do that, is there a difference between the way you and Mr Hanks approach the primary question? There seems to be a difference. You criticise Justice Selway’s approach whereas, as I read Mr Hanks’ submission, he says that Justice Selway approached the matter by the right steps. He got the wrong answer, but he approached it in the right way.

MS TATE: There is a slight difference between Mr Hanks and myself as to what proposition we take Bourke to be authority for in regard to the test that is to be applied to characterise a Commonwealth law to test whether that law infringes the restriction in 51(xiv). It will be our submission that the test that is endorsed by the joint judgment in Bourke is the simple familiar test of characterisation, that is, whether there is a connection that can be described as a “with respect to” connection. Mr Hanks takes the view that one simply asks whether the Commonwealth law touches and concerns State insurance to more than an incidental degree. But the view of both of us is that they are really differences of subtlety, your Honour.

But the Commonwealth’s response to our principal submission is that the impugned provisions do not affect State insurance properly understood. As we understand it, the Commonwealth’s argument is fourfold. Firstly, the Commonwealth argues that the meaning of “State insurance” in section 51(xiv) at the time of its drafting in or about 1897 did not include compulsory forms of insurance. Thus they argue that insofar as the impugned provisions remove the obligation to insure with the State, those impugned provisions would not in 1900 or 1897 have infringed the restriction.

KIRBY J: Can I just add a footnote there? Do not take me, at least, as accepting that one restrains the ambit of federal power by reference to what was assumed or decided or done in 1900. That is an originalist view of the Constitution that I simply do not accept myself and I do not believe that the Court in its decisions has accepted.

MS TATE: Yes, and we agree with your Honour in relation to that, with respect, your Honour. But the Commonwealth’s submissions at paragraph 17.2 and 17.3 make out their case that the meaning of “State insurance” in 1897 or between 1897 and 1900 did not extend to include compulsory insurance.

GUMMOW J: There are two questions wrapped up in that, are there not: a system of compulsory insurance à la Bismarck; or a system of compulsory insurance with one compulsory insurer - a different step, a further step.

MS TATE: It is a further step. That is accepted, your Honour. But the Commonwealth have not, we think, made that further step, although it is probably implied in what they say. They make the bolder proposition that it simply did not extend to compulsory insurance in 1897 or between 1897 and 1900, but they then go on to argue that the impugned provisions do not now infringe the restriction in 51(xiv) because the restriction, being a prohibition, should be construed strictly so as to have as its fixed meaning the narrow meaning it bore in 1897, and the Commonwealth’s submissions at paragraph 25 are to that effect.

The Commonwealth then go on to say that on a strict construction of the restriction the power granted to the Commonwealth to make laws with respect to insurance include the power to make laws regulating the environment or milieu of the industry whether within State boundaries or not and that is all that the impugned provisions do. The Commonwealth then proceeds to argue that the correct test for the characterisation of a law to determine if it infringes the restriction is not to ask is the law a law with respect to State insurance, but they say even if it were the impugned provisions would not be laws with respect to State insurance because they affect only the obligation to insure which predates and is distinct from the insurance relationship itself.

To those four contentions we argue as follows in summary. Firstly, we argue that as at 1897 to 1900 compulsory forms of insurance were in existence in Germany and other parts of Europe. Sometimes, on occasion, the obligation was to insure with the State and these forms of compulsory insurance were known in England and in the Australian colonies. In any event, we submit that the restriction in 51(xiv) ought not to be fixed in meaning to that which it had in 1897. We say this is contrary to orthodox principles of constitutional interpretation and is not otherwise supported by principle. Compulsory insurance is now commonplace and State insurance – that expression – should be interpreted to include them.

We further say that in any event the restriction ought not to be interpreted as a prohibition. We note here that it is necessary for the Commonwealth to make out both of its propositions in relation to the meaning of State insurance, that is, that the meaning in 1900, 1897, was a narrow and restricted meaning and the second proposition, that for various reasons of principle, that meaning must now remain fixed.

On the contrary, for us to dispel that argument it is only necessary for us to show that either of those propositions are wrong. Either in 1897 it did not have a narrow and restricted meaning or that even if it did it now no longer has that as its fixed meaning on orthodox principles of constitutional interpretation. Further, we say that the distinction between the milieu or regulatory environment of insurance and the terms and conditions of the insurance relationship is not a distinction drawn in the Convention Debates, nor is it reflected in the legal history leading up to those debates.

There is no support for the regulation of all insurance to be left to the Commonwealth. It was for the States to regulate the insurance they, as State insurers conducted within the boundaries of the State. Indeed, typical early colonial laws on insurance were addressed to regulating the industry - disclosure on solvency by private insurers and the like.

Finally, we argue that the correct test for the characterisation of a law to determine if it infringes the restriction - - -

GUMMOW J: I am just not sure about that - sorry to interrupt you. There was, was there not, in a number of colonies before 1900, not States – a number of colonies before 1900, regulatory regimes by statute controlling insurers which would have to some extent been English based, I imagine, UK based.

MS TATE: Yes, your Honour.

GUMMOW J: Do you say those systems of regulation were not State insurance?

MS TATE: They clearly were not State insurance because, as your Honour says, there were no States. My point there, your Honour, is to say that it had been acknowledged before Federation that the kind of laws one might need in relation to the insurance industry would be laws which regulated the industry. Given the degree of instability that there had been - - -

GUMMOW J: I know, but as to that regulation, was that to be described then as State insurance? You would say no, would you not?

MS TATE: No, your Honour. What we would say is that when it was determined that the States - - -

GUMMOW J: Any control would be federal, would it?

MS TATE: Well, not at that stage, your Honour. The point is really, your Honour, that if the States were to be recognised as retaining a capacity to regulate insurance within the State by the State insurer, then those degrees of regulation might have included regulation about the regulatory environment. Certainly they may have included regulation in relation to whether or not there was an obligation to insure with the State as opposed to some other insurer, so that the State either would be in a position, as Justice Kirby says, to ensure that it has the funds to compensate the workers but also – and this is in the historical materials – to ensure not only that the workers were guaranteed the entitlements that they were promised but also that premiums were kept under control. What we say is that the laws that could be anticipated to be made by the States might have extended beyond simple terms and conditions of the insurance relationship.

HAYNE J: But is the central element in the submission the understanding of the expression “State insurance” as confined to the provision of insurance by a State?

MS TATE: Yes, your Honour.

GLEESON CJ: It means State Government insurance?

MS TATE: It is the business of insurance owned or controlled by the State, and your Honour will have seen that extended definition in Bourke’s Case, that it is not necessary for the institution to be owned by the State, that it may be that the institution, the authorised insurers, the licensed insurers, are controlled by the State and - - -

HAYNE J: Controlled in the sense of ownership control or control in the sense of subject to a scheme of regulation prescribed by the State?

MS TATE: Your Honour, the Solicitor-General for New South Wales has addressed you in the written submissions that the expression is to have the latter understanding. We do not need to go that far with respect to the Victorian scheme because we have here a State insurer owned and in every sense controlled by the State as an emanation of the State with statutory functions subject to direct ministerial control supported by statute.

GLEESON CJ: But you read State insurance as meaning State Government insurance?

MS TATE: Yes, State Government insurance, your Honour.

KIRBY J: You do not necessarily give away the New South Wales point. You just say it is not necessary for your purposes. It is enough for it to be State Government insurance.

MS TATE: Yes, your Honour, that is right. We say that it is enough that it be the State Government, but perhaps if I could - - -

HAYNE J: The two propositions are radically different, are they not? State Government insurance is a creature radically different from insurance that is subject to State regulation or regulatory regime, surely.

MS TATE: That might be something upon which the Solicitor-General for New South Wales might be happy to respond to your Honour on, but perhaps I should make this clear, given that there has been questions in relation to geographical boundaries. It is not our submission that State insurance means all the insurance that occurs within the geographical boundaries of the State, whether it be by the RACV in relation to motor vehicle insurance, or whether it be by HBA in relation to medical insurance, or whatever. It is not our submission that it is all the insurance within the boundaries of the State. State insurance is the business of insurance owned or controlled by the State.

GUMMOW J: What does this phrase “extending” mean in connection with insurance? Does it tell us anything about what is meant by insurance in this paragraph?

MS TATE: Through the use of the word “extending” in the second limb of 51(xiv)?

GUMMOW J: Yes. What is “extending”, contracts of insurance, solicitation of contracts of insurance, the situations of risks? I do not know.

MS TATE: Your Honour, in the Convention Debates there was a discussion about the extent to which the New Zealand Government insurance, which had been established in 1879 - - -

GUMMOW J: Yes, might come here and do business.

MS TATE: There was critical discussion about that - - -

GUMMOW J: As a foreign corporation I imagine.

MS TATE: Indeed, your Honour, and there was questions about whether New Zealand’s Government insurance had extended beyond the limits of the country of New Zealand in that they were what might be called colloquially writing business here. There were premiums here – premiums taken out here. New Zealanders might take out policies and then travel to Australia or to other places and the risks might be associated with matters that might occur in other jurisdictions.

HAYNE J: But all of those things were things that had been present to the mind of at least some colonial legislatures, were they not?

MS TATE: Yes, your Honour.

HAYNE J: We looked at some of these issues in AssetInsure I think, the case about the Insurance Act (Cth) and the history of the provision in the federal Act about meeting certain liabilities before others according to the situs of the debts. But all of this had a history in 19th century colonial legislation I think.

MS TATE: Yes.

GLEESON CJ: I noticed from part of the Convention Debates referred to in the Commonwealth’s submissions that it was Mr Higgins who apparently composed this amendment.

MS TATE: Yes, your Honour.

GLEESON CJ: In the course of debates he said:

but if that colony extends its operations to other colonies, I do not see why it should not be treated like an ordinary company.

So he seemed to have in mind an insurance company established by a colonial government which was to be left alone provided it confined its operations to the colony, but once it extended its operations beyond the colony it should be treated like an ordinary company.

MS TATE: Your Honour, we would not construe that as suggesting that once it had extended its business beyond the colony then the whole of its business - - -

GUMMOW J: That is the question.

MS TATE: - - - including the intrastate insurance business, was to be also controlled by a federal law.

GUMMOW J: Would you have to draw a line somehow on your submission.

MS TATE: Yes, your Honour, and that line has been sought to be drawn in Bourke and in other cases, your Honour.

KIRBY J: In drawing the line the Commonwealth gives a lot of emphasis to the so-called principle in the Defence of Government Schools Case and the suggestion that you construe a grant of power to the Federal Parliament generously and you construe the excision from that power of the State area narrowly.

MS TATE: Yes, your Honour.

KIRBY J: One might say one would expect the federal Solicitor-General to make that sort of submission, but it does not seem to be a neutral principle for constitutional interpretation and I think it has been disapproved in cases since.

MS TATE: Yes, your Honour. We challenge the application of that principle on a number of grounds. One, we say it has been rejected by this Court - - -

KIRBY J: It did not gather four Justices in the Defence of Government Schools Case, did it?

MS TATE: No, indeed.

KIRBY J: It had Justice Mason and Justice Aickin agreed with him, and there was one other Justice, I think.

MS TATE: Justice Gibbs said that the words should be construed according to their ordinary meaning when it was a prohibition, and Justice Aickin, although he agreed with Justice Mason, also agreed with Justice Gibbs. Now, we would say in those circumstances there is not that third support for the propositions within the judgment of Justice Mason. It was Justice Mason and Justice Wilson who sought to embrace a principle of interpretation in relation to prohibitions in the Constitution whereby those prohibitions would be given a restricted and strict meaning. That principle of constitutional interpretation has had no further support. It has been rejected by this Court. It has been said to have uncertain meaning and application.

KIRBY J: That was Justice Gummow in the Federal Court, I think, in the - - -

MS TATE: It has been recognised that in some certain limited set of circumstances, namely where there is a simple identifiable mischief, it may have some strength. We would say that it does not apply here because there is no simple identifiable mischief. We would also say, your Honour, that the restriction ought not to be construed as a prohibition, and one of the propositions that is plain from Bourke’s Case is that the restriction is not to be construed as a prohibition. So it is not to be construed as 114 or 116, and so on, your Honours.

KIRBY J: In any case, as a matter of principle, why would one construe the grant of power to the federal Parliament broadly and then the excision from federal power reserved to the State Parliaments narrowly except if you have an approach to the Constitution that is biased in favour of the Commonwealth? I mean, I just do not understand what would be the intellectual support for such a principle.

MS TATE: Submissions had been made in the DOGS Case based on a principle of Sir Owen Dixon’s in Wragg’s Case in relation to section 92 which was a completely different context, and there had been an attempt to develop an argument on the basis of that, but I think that is the only source of authority that Justice Mason cites for that passage in his judgment.

Your Honours, might I say with respect to the four propositions that are contended for by the Commonwealth, we have responded in those first three ways that I have mentioned, and fourthly and finally, we will argue that the correct test for the characterisation of a law to determine if it infringes the restriction in 51(xiv) is the familiar test of assessing whether the law is a law with respect to State insurance. We make that submission on the authority of Bourke’s Case and we argue that the distinction between the obligation to insure and the insurance relationship that is made by the Commonwealth is an artificial distinction and the nexus required for the impugned provisions to be characterised as laws with respect to State insurance is made out here. We will argue that the impugned provisions are thus invalid.

GUMMOW J: What is the relationship between extending beyond the limits of the State in 51(xiv) and 51(i)?

MS TATE: There has been some academic commentary about whether those two notions are similar, your Honour, whether the notion of “among the States” could have been an equivalent notion to be employed within 51(xiv). Certainly, your Honour - - -

GUMMOW J: Why would not State insurance extending beyond the limits of the State amount to trade and commerce among the States? It would be covered by 51(i) anyway.

MS TATE: Yes, your Honour, and indeed, insofar as the States might have extended the business of the State insurer to, for instance, New Zealand, then it would be included clearly within trade and commerce with other countries.

GUMMOW J: Yes.

MS TATE: Your Honours, if I might turn then, having indicated a general summary of the structure of our argument, to the legislation to demonstrate how the problem arises. If I could take your Honours first to the Commonwealth Act and the impugned provisions within the Commonwealth Act. That Act is the Safety, Rehabilitation and Compensation Act 1988. If I could take your Honours first of all - - -

GUMMOW J: We have Reprint No 5.

MS TATE: Yes. It is Reprint No 5, your Honour. The long title of this Act is to be found at page 1 of the reprint and the long title is that it is:

An Act relating to the rehabilitation of employees of the Commonwealth and certain corporations and to workers’ compensation for those employees and certain other persons, and for related purposes.

The critical provision for our purposes is section 14 which appears on page 36 of the reprint. Section 14(1) provides that:

Subject to this Part, Comcare –

and Comcare is established under section 68 of the Act –

is liable to pay compensation in accordance with this Act in respect of an injury suffered by an employee if the injury results in death, incapacity for work, or impairment.

So the subsection contains three discrete elements; Comcare which, as I say, is established by section 68, and - - -

GUMMOW J: It is a body.

MS TATE: Yes, your Honour.

GUMMOW J: What does that mean?

MS TATE: That is at page 116, your Honours, Comcare. It establishes a body called Comcare. At least, the functions which that body is to carry out are made plain within the next section and, in particular, if I could refer your Honours to the function under section 69(a) which is the function:

(a) to make determinations accurately and quickly in relation to claims and - - -

GUMMOW J: It is really 74, is it not, 68 plus 74?

MS TATE: Section 74 gives its composition, yes, your Honour:

(a) is a body corporate with perpetual succession –

and so on. Now, section 14(1) says that:

Comcare –

that body with that composition –

is liable to pay compensation in accordance with this Act in respect of an injury –

“Injury” is defined in section 4 which is at page 6 of the reprint.

KIRBY J: What was that provision, the one you last mentioned?

MS TATE: Section 74 is the composition that makes it a body corporate and so on, your Honour.

KIRBY J: And where is the liability to pay compensation?

MS TATE: The liability to pay compensation is section 14, your Honour. It is at page 36 of the reprint.

KIRBY J: That is for an injury and you say that is defined?

MS TATE: Yes, “in respect of an injury”. And “injury” is defined, your Honour. It is defined in section 4 at page 6 of the reprint firstly under (a) as “a disease suffered by an employee”, and “disease” is defined in section 4 on the previous page, page 5, to mean:

(a) any ailment suffered by an employee; or

(b) the aggravation of any such ailment;

being an ailment or an aggravation that was contributed to in a material degree by the employee’s employment by the . . . corporation.

Then it is further defined as being under paragraph (b):

an injury (other than a disease) suffered by an employee, being a physical or mental injury arising out of, or in the course of, the employee’s employment;

“Employee” is defined in section 5 at page 17 as being, firstly:

(a) a person employed by the Commonwealth or by a Commonwealth authority –

and secondly:

(b) a person who is employed by a licensed corporation.

Now, a “licensed corporation” is defined in section 4, page 7, as:

a corporation that is the holder of a licence that is enforced under Part VIII.

And “licence” similarly means “a licence under Part VIII”. “Corporation” is defined in essentially constitutional terms in section 4, page 4; a “foreign corporation”, “financial corporation”, “trading corporation” and includes:

(d) a body corporate incorporated in a Territory.

A “licensed corporation” is defined, section 4, page 7, as:

a corporation that is the holder of a licence that is in force under Part VIII.

“Licence”, similarly, “means a licence under Part VIII”. “Corporation” is defined in essentially constitutional terms in section 4, page 4, foreign corporation, financial corporation, trading corporation and includes a body corporate incorporated in a Territory. Then, as I said, “licenced corporation” is a corporation which is the holder of a licence under Part VIII. Part VIII of the Act is to be found at page 151 and it begins with section 98A. Under section 98A(1), it is provided that:

This Part enables the Commission to grant licences to Commonwealth authorities or eligible corporations.

“Commission” is defined in section 89A to be the “Safety, Rehabilitation and Compensation Commission” and that is on page 127. So it is that Commission which grants licences to Commonwealth authorities or eligible corporations.

KIRBY J: Could you just tell us, this appears to be an added section to the 1988 Act, is this something that was conceived of later in addition to licensing federal agencies as such and then, with growing privatisation of federal agencies, added provisions were made so that though they were privatised they would remain under federal regulation. Was that the general philosophy?

MS TATE: That is the general philosophy, your Honour. Moreover, it is not just the privatised corporation itself, but here it is now any corporation which is in competition with the Commonwealth authority, or a former Commonwealth authority is in a position to apply - - -

GUMMOW J: Where do we see that?

MS TATE: Your Honour, that is to be found at section 100. The scheme for licensing, it is a two-stage process. First of all a corporation has to apply to a Minister for a declaration from the Minister that the corporation is an eligible corporation. For the Minister to make such a declaration, the Minister has to be satisfied that one of the three possible criteria are satisfied and as I said, the corporation:

(a) is, but is about to cease to be, a Commonwealth authority; or

(b) was previously a Commonwealth authority –

as your Honour Justice Kirby noted, or -

(c) is carrying on business in competition with a Commonwealth authority or with another corporation that was previously a Commonwealth authority -

then in those circumstances the Minister may –

declare the corporation to be eligible to be granted a licence –

Now, if the corporation succeeds in becoming an eligible corporation, and your Honours will see the definition of an “eligible corporation” on that same page under section 99 – the corporation can then apply as an “eligible applicant” and your Honours will see that definition. The corporation can apply to the Commission - the Safety, Rehabilitation and Compensation Commission - to be granted a licence and it makes that application under section 102 which is to be found at page 154.

KIRBY J: The theory behind it is the so-called level playing field theory and economic efficiency. We were a Commonwealth authority - we are not now, but we are in competition with Commonwealth authorities - therefore, we should not have the irksome necessity to conform to all the State laws in Australia. We should just stay within the federal regulation. To do that we need the approval of the Commission and the licence and that ensures a level playing field for federal or federal-type authorities. That is the theory, I suppose.

MS TATE: Your Honour, no doubt the Commonwealth Solicitor-General will address your Honours on the policy that underlies it but certainly those are the three criteria that have to be satisfied for the Minister to declare a corporation to be an eligible corporation. That eligible corporation can then apply to the Commission and your Honours will see under section 103 the Commission has been given the power on an application to:

grant the eligible applicant a licence for a specified period.

When it grants such a licence it must determine under subsection (2), firstly, whether:

the licensee may accept liability for compensation –

secondly –

the degree to which, and the circumstances in which, the licensee is authorised to manage claims –

and thirdly –

the conditions (if any) to which the grant of the licence is subject.

And those conditions may include, under Division 5, such things as the payment of licence fees or the obtaining of bank guarantees to discharge liabilities. If I just give your Honours reference to those, section 108D(1)(b) and 108D(1)(d). Now, the Commission, as I say, has the power to make a licence, it then can make a decision to grant a licence and if it does that, it is required to proceed under section 154 which requires the Commission, having regard to various matters, to determine, if it is appropriate to do so, to grant the licence sought.

In determining whether it is appropriate to grant a licence, the Commission has to be satisfied of four conditions and they are set out in subsection (2) including the sufficiency of resources of the applicant, under paragraph (b), whether the applicant has a capacity to manage claims in accordance with certain standards for the management of claims, whether the grant of the licence will not be contrary to the interests of the employees and whether the applicant has the capacity to meet certain standards in relation to rehabilitation and occupational health and safety.

CALLINAN J: I suppose if you have to comply with a whole lot of different insurance regimes, it would be very difficult to self-insure or it might make self-insurance much more expensive. You may have to lay off some of your risk. One can see the advantages in being obliged to comply with only one regime if you are carrying on interstate business or a transnational business – trans-state business.

MS TATE: No doubt considerations of convenience would come into that, your Honour.

CALLINAN J: Considerations of economics too, I suppose.

MS TATE: And considerations of economics perhaps as well.

KIRBY J: The extension of that logic is we just close most of the State business of workers’ compensation and use the corporations power to provide for federal regulation of workers’ compensation throughout the nation. We revisit then Work Choices and that - when you sit here you get a bit suspicious, you see. You watch one step, then you think what the next step is going to be.

MS TATE: I might say from my position it is rather similar to that as well, your Honour.

CALLINAN J: The countervailing argument also is that you may have entirely different circumstances in different States and different regions which - - -

MS TATE: Accepted that, your Honour. There may be a variety and diversity between the States as to the requirements that are imposed.

CALLINAN J: It is an unpopular notion in Canberra, but it is true.

MS TATE: Yes. Now, your Honours, I intended to refer you to section 104 in relation to the licence decision. I may have said section 154 and I apologise for that. It is at page 155. There under 103 is the power to grant the licence and then under 104 the licence decision is made and there is a need for the Commission to be satisfied of those four matters that I mentioned.

Your Honours, if a licence is granted which permits the licensee to accept liability for compensation, then under Division 3, which begins on page 159 of the reprint, and section 108 of the Act, it is provided there under section 108(1) that:

A licence may provide that the licensee is authorised to accept liability to pay compensation and other amounts under this Act in respect of particular injury, loss or damage suffered by, or in respect of the death of, some or all of its employees under this Act.

The most important section for the purposes of this case is the following section, which is section 108A, which sets out the consequences of a licensee’s authorisation to accept liability. That provides that:

If:

(a) a licensee is authorised to accept liability to pay compensation and other amounts under this Act . . . ; and

(b) such injury, loss, damage or death occurs;

then:

(c) the licensee is liable to pay the compensation . . .

(d) Comcare is not liable to pay compensation –

and then under section (7) it provides that:

If a licensee who is a corporation is authorised to accept liability to pay compensation and other amounts under this Act in respect of a particular injury, loss or damage suffered by, or in respect of the death of, some or all of its employees after the licence comes into force then:

(a) no law of a State or Territory relating to workers compensation applies to a licensee in respect of such injury, loss, damage or death - - -

GLEESON CJ: How does this Act tie in with the functions of the Administrative Appeals Tribunal?

MS TATE: Your Honour, there is provision for appeals under section 63, which is on page 108 of the reprint, for certain decisions to be reviewed in relation to the acceptance or refusals of claims, and they are of general application, your Honour.

GUMMOW J: What section is that?

MS TATE: Section 63, your Honour, reviewable decisions.

GLEESON CJ: Section 64.

MS TATE: Well, I think section 63 is sets out the definition of – sorry, “Reviewable decisions to be notified in writing”. Section 64 is “Applications to the Administrative Appeals Tribunal”. But your Honours will see that it is critically section 108A(7)(a) which is the section which provides that “If a licensee . . . is authorised to accept liability to pay compensation and other amounts under this Act”, then “no law of a State or Territory relating to workers compensation applies to a licensee in respect of such injury”.

It is 108A(7)(a) combined with 104(1) and 108(1) which permits the licence to provide that the corporation is authorised to accept liability. It is that combination of provisions which have the effect that a licensed corporation under the Commonwealth Act, where the licensee is authorised to accept liability, is no longer bound by State workers’ compensation laws that would otherwise apply. Those laws that are excluded include any State laws relating to workers’ compensation which require employers to insure their workers’ compensation liabilities with the State insurer - - -

KIRBY J: What is the paragraph that says that? What is the subsection?

MS TATE: It is section 108A(7)(a), your Honour. That, in effect, excludes laws of the State relating to workers’ compensation and they include laws of the State requiring employers to insure their workers’ compensation liabilities with a State insurer. As I said at the outset, those impugned provisions have the effect of dissolving or removing the obligation imposed by State law to hold insurance with a State insurer.

GUMMOW J: That is just an operation of section 109.

MS TATE: By reason of the operation of section 109. Yes, your Honour. Yes.

GUMMOW J: The question is what is it that takes that without power, outside power, so there is nothing on which section 109 can operate?

MS TATE: Yes, your Honour.

GUMMOW J: You seek to read down paragraph (a). As regards Territory it is valid, is it not?

MS TATE: Yes. The paragraph in the section - - -

GUMMOW J: So you strike out “a State”?

MS TATE: Yes, your Honour. The removal of “a State”, “a State or” perhaps, or removal of “State or” perhaps.

HAYNE J: Can I just understand the sequence that is involved there. It may be that there are several steps compressed. The Accident Compensation Act (Vic) provides for various liabilities of an employer to an employee.

MS TATE: Yes, your Honour.

HAYNE J: Section 108A(7)(a) of the federal Act has the consequence that the employer owes no liability under the State Act. Is that correct?

MS TATE: Yes, your Honour.

HAYNE J: The WorkCover Insurance Act (Vic) obliges employers to insure with the State, VWA, against, amongst other things, liabilities under the Accident Compensation Act, but by hypothesis the employer who has a licence under the SRC Act is under no such liability. Is that right?

MS TATE: He is under no such liability. Yes, your Honour. It has destroyed both the liability under the workers’ compensation legislation and the obligation to insure with respect to those liabilities under the State workers’ compensation legislation.

HAYNE J: What obligation would an employer have if attention were confined to the Victorian legislation if that employer owes no obligation under the Accident Compensation Act?

MS TATE: Your Honour, it is our submission that the workers’ compensation liabilities under the Accident Compensation Act have to be read together with the obligation to ensure under the State Insurance Act as an interconnected set of rights and duties.

HAYNE J: Yes. I can understand that but if there is no liability under the ACA what is the obligation to insure against what is by hypothesis no liability?

MS TATE: We would say, your Honour, that insofar as the Commonwealth legislation renders null or nullifies any liability that there might be under the State laws that that would not be something which the Commonwealth could do in the face of the restriction under 51(xiv) because that would be for the Commonwealth to do something indirectly which it is prohibited from doing directly, using “prohibited” in a general sense. So we would say, your Honour, that there - - -

HAYNE J: There is the vice in it, is it not, or there is the difficulty in it? When you say using “prohibited” in a general sense, there is the field for debate and you assume the answer by using that expression. But if there is no obligation owed by an employer under the State Act to its employees, if the Commonwealth enacts, as it has, a different set of rights and liabilities, what is it then that causes us to come to consider any question of obligation to insure? There is an obligation to insure against what?

MS TATE: We would say, your Honour, that you cannot avoid the restriction in 51(xiv) by removing all the liabilities in relation to which the State has imposed an obligation to insure and say that that does not infringe the restriction that the Commonwealth cannot make a law that is a law with respect to State insurance. When I use the expression “prohibition” in a general sense, your Honour, I simply meant that insofar as the Commonwealth Solicitor-General describes the restriction as a prohibition to which the principle in the DOGS Case can apply, we do not see that as fitting within that category, but insofar as the dictum in Schmidt’s Case applies, which is the dictum that I took your Honours to in the Work Choices matter, we would say clearly that general maxim or principle must apply to the circumstance that your Honour has described.

GLEESON CJ: Solicitor-General, the word “licensee” in section 108A(7)(a) includes Commonwealth authorities, does it not?

MS TATE: Yes, your Honour. Commonwealth authorities actually are separately provided for. Certainly, Commonwealth authorities - - -

GUMMOW J: There is a definition of “licensee” in section 4, is there not? It means “a Commonwealth authority or a corporation”.

MS TATE: Or a licensed corporation, yes.

GLEESON CJ: Insofar as this paragraph applies to Commonwealth authorities who are licensees, how in your submission does it operate?

MS TATE: We do not - - -

GLEESON CJ: Do you question its validity in that respect?

MS TATE: No, your Honour.

GUMMOW J: You had better look again at the definition of “licensee”.

MS TATE: Section 108A(7) actually states that it is “a licensee who is a corporation”. So 108A(7) does not apply to Commonwealth authorities, your Honour.

GLEESON CJ: What is your submission in relation to Telstra? We get to this problem, as I understand it, because Optus competes with Telstra. Let us just think about Telstra for a moment.

MS TATE: Yes, Telstra would be a licensed corporation. We would say that our argument must apply to all licensed corporations, your Honour, and that would include Telstra. Your Honours, to understand and detail the basis of the challenge that we put, it is necessary to see how the impugned provisions interact with the provisions of the State legislation, so if I could turn now to that State legislation - - -

GUMMOW J: Just before you do that, does the AAT have any role in Part VIII?

MS TATE: In respect of Part VIII?

GUMMOW J: Yes. You invited us to look at section 35, was it?

MS TATE: Yes, the AAT does appear to have a role in relation to Part VIII, but perhaps I could give your Honours an exact reference on that at a later point and not delay now, your Honour.

GUMMOW J: All right.

MS TATE: With respect to the Victorian legislation, there are two pieces of Victorian legislation. There is the Accident Compensation (WorkCover Insurance) Act, which is the slim Act, 1993, and we have referred to it in the submissions as the State Insurance Act and the Accident Compensation Act itself, 1985 - - -

KIRBY J: Is there not some significance in the fact that the Victorian Parliament saw fit to draw a distinction between its regulation of compensation obligations and its separate regulation of WorkCover insurance?

MS TATE: We would say no, your Honour, that no doubt it is a matter of history as to why it is that the rights and obligations imposed by these different pieces of legislation are in different Acts, but section 5 of the State Insurance Act makes it plain that the Act must be read and construed as one with the Accident Compensation Act, and indeed there are many of the terms that are employed in the State Insurance Act which are not defined in that Act that one needs to consider their definition in the other Act, your Honour.

KIRBY J: I understand that, but the other way of looking at is that the division that has been made, though obviously the two statutes are interconnected, is a logical and conceptual division, and that the federal legislature cannot strike impermissibly at the slim Act but, if its laws have some effect on the fat Act, then that is not within the zone of prohibition.

MS TATE: It may depend on what effect it has on that Act, your Honour.

KIRBY J: Of course the argument for saying that they are interconnected includes the fact that one could not in a real sense so easily have an accident compensation system unless there were a high degree of participation of employees. One infers that - - -

MS TATE: Yes, your Honour.

KIRBY J: - - - that they need the pool of premium income to provide for a system of universal insurance for accident compensation, but it is at least arguable, taking Justice Hayne’s analysis, that if you strike at accident compensation obligations, then that is a law with respect to accident compensation of a federally related corporation and therefore permissible; whereas it has an incidental effect on the insurance but not, as it were, an impermissible effect on the insurance provisions of State law.

MS TATE: Might I say, your Honour, the approach that we adopt is one whereby there is a toleration of incidental effects and in fact we would say that Bourke makes it plain that there must be. We do not say that simply because a Commonwealth law affects State insurance in any way, perhaps in relation to the examples your Honour is considering, that there is some remote effect on the insurance obligation by reason of a federal provision which is inconsistent with one of the provisions in this Act. We would say some incident effect is to be tolerated. Indeed, we say that it is the toleration of that incidental effect which shows that we do not have here a prohibition as such and we do not have an exclusive State legislative power, but I do not want to get into that debate just at the moment, your Honour. The detail of this legislation – it is necessary for the Court to be given some presentation of the obligations in this legislation in order for the interrelationship between the Commonwealth and the State Acts to be properly demonstrated.

GLEESON CJ: As a matter of history, it is relatively recent, is it not, for workers’ compensation in States to be provided by State government authorities?

MS TATE: In Victoria, your Honour, when we introduced compulsory insurance for workers’ compensation liability, which was in 1914, at the same time we established a State insurance office.

GLEESON CJ: In New South Wales, as I recollect it, what used to be called the Workers’ Compensation Commission had as a large part of its jurisdiction overseen what I might call the business of private workers’ compensation insurers.

MS TATE: Yes, your Honour. In 1914 it was not the case that the State insurance office was the exclusive insurer. It was one of many insurers and the major part of its functions was to regulate authorised insurers. Indeed, over the years since 1914 there have been authorised insurers permitted, licensed insurers permitted. The State has had only a regulatory role and just about with each change of government there has been alterations to the accident compensation regime. I know Justice Hayne has commented on the fact that the Accident Compensation Act is one of the most frequently amended pieces of legislation within Victoria. So there have been different regimes and there have been systems of private insurers where the State did at times no more than regulate those private insurers.

KIRBY J: I think the Chief Justice’s recollection is correct. If I remember those days of the Workers’ Compensation Commission No 1, the State Government Insurance Office tended to insure State government authorities. It did some private insurance but it would have had only about 5 per cent of the cases and the rest were private insurers who competed for business with the State Government Insurance Office in New South Wales, so it was a small player at that stage.

MS TATE: Yes, your Honour. Your Honours, before I turn to the specific sections of the Accident Compensation Act, might I mention just three important general features of the Act that are relevant to these proceedings.

GUMMOW J: Have you finished with the shorter Act?

MS TATE: Yes. Not with what we have called the slim State Insurance Act. I am yet to go to that, but the large, and as Justice Kirby says, rather fat Act, the Accident Compensation Act 1985, this is the first Act that I need to draw your Honours attention to.

KIRBY J: I withdraw the word “fat” in case it is politically incorrect.

MS TATE: No, I am sure it is not, your Honour. Perhaps I will have a word with Chief Parliamentary Counsel.

There are three important features of the Accident Compensation Act 1985. The first feature is the entitlement of workers. There is a hybrid scheme provided for under this Act. The entitlements of workers include the entitlement to compensation which workers have under the Act in respect of injuries arising out of or in the course of employment and that is a no-fault based statutory entitlement to compensation.

KIRBY J: What are these submissions directed to to showing that there is a more generous scheme under the Victorian State Act than under the federal Act?

MS TATE: No, your Honour, we have not sought to make out that there is a more generous scheme under the State Act. It is really just so that the Court can see in some degree of detail that the obligation that is dissolved by the Commonwealth law is an obligation which fits within a general scheme for, first of all, statutory no-fault entitlements to compensation and, secondly, the entitlements which are preserved under this Act at common law for workers to bring common law proceedings for damages in respect of negligent conduct of their employers where the injury suffered is what is described as a serious injury. That is the first threshold condition and the second threshold condition is that the serious injury occurred after a particular date, namely, 20 October 1999.

GUMMOW J: Where do we see this section?

MS TATE: Your Honour, section 82 is the principal section in relation to entitlement. That is the entitlement to no-fault based compensation. It is under subsection (1):

If there is caused to a worker an injury arising out of or in the course of any employment, the worker shall be entitled to compensation in accordance with this Act.

The second, subsection (2), relates to the entitlements of dependants after the death of the worker and subsections (2B) and (2C), if I could just alert your Honours to that, they are subsections that provide that there is a need for the employment to be a significant contributing factor to the injury or disease. Only in those cases identified in (2B) and (2C), that is, where the injury is by way of:

(a) a heart attack injury or stroke injury . . .

(b) a disease contracted by a worker in the course of the worker’s employment . . .

(c) a recurrence, aggravation, acceleration –

of any of those pre-existing injuries or diseases. So there is no requirement for employment to be a significant contributing factor for the injury to arise out of or in the course of employment under the general entitlement.

KIRBY J: I just do not see the point of taking us to these sections. Let it be accepted that both under the federal and the State Act there are compensation entitlements. They will not be exactly the same. They will have some similarities. What does it matter?

MS TATE: Well, simply, your Honour, for your Honours to see exactly what the obligation that is – what that obligation relates to and perhaps - - -

KIRBY J: Unless you are making a point that - - -

MS TATE: Yes, your Honour.

KIRBY J: - - - the effect of this is to take away very significant entitlements. I mean, my recollection in the old days was that Commonwealth employee’s compensation was extremely mean and very poorly administered and very bureaucratic and the State systems were more generous, they were judicially administered and they were more just. Now, I get an impression that there has been a lot of shift in both the federal and the State laws so there is now not all that much difference between them. But I do not see what you are aiming your submissions at.

GUMMOW J: We have to know – I have to know at any rate – what it is that is in the State law as identified as such upon which 108A(7)(a) bites.

MS TATE: Yes, your Honour. As I say - - -

GUMMOW J: What Mr Bennett would say is struck out by section 109.

MS TATE: Yes, your Honour.

GUMMOW J: What you say is preserved.

MS TATE: What we would say is preserved.

CALLINAN J: The functions under section 19 of the State Act are rehabilitative functions and workplace safety. I assume the Commonwealth legislation has similar objects, does it?

MS TATE: Yes, your Honour.

CALLINAN J: But there may be significant differences and they may depend upon the work done in particular regions, in particular States. There may be a clash there, for example. I do not know whether there is, but there may be.

MS TATE: We have not sought to suggest that the State scheme is a much more generous scheme to workers or employees than the Commonwealth scheme - - -

GUMMOW J: It has nothing to do with the case.

MS TATE: We have not sought - - -

GUMMOW J: It is just colour.

MS TATE: - - - to make that proposition.

GUMMOW J: We have to know how subsection (7)(a) works.

CALLINAN J: I mean, does it, for example, work in relation to provisions for workplace safety having regard to section 19 of the State Act? I mean, it may not, but that is the sort of example that one might be looking for.

MS TATE: Your Honours, apart from that entitlement to statutory no-fault compensation, there is also – and this appears to be different from some other State legislation, I understand New South Wales – preserved the entitlement to bring common law proceedings - - -

GUMMOW J: We have to see the section.

MS TATE: - - - for damages and that is 134AB.

GUMMOW J: Now, you took us to section 82. What is the next section you want to take us to?

MS TATE: The next section, your Honour, that I wish to take you to is 134AB and that is on page 400. It is subsection (2) and that provides that:

A worker may recover damages in respect of an injury arising out of, or in the course of, or due to the nature of, employment if the injury is a serious injury and arose on or after 20 October 1999.

Now, I need not take your Honours to the provisions but there are two alternative definitions of “serious injury”. Under section 134AB(15) a worker can have a degree of impairment which is 30 per cent or more and that will be, by definition a serious injury or, alternatively, the worker can establish under section 134AB(37), which is on page 415, that the injury they have suffered is of one or other of these kinds:

(a) permanent serious impairment or loss of a body function; or

(b) permanent serious disfigurement; or

(c) permanent severe mental or permanent severe behavioural disturbance or disorder; or

(d) loss of a foetus.

Then under subsection (38) there is guidance given as to how those terms are to be interpreted and if I might just refer your Honours to the leading authority of the Victorian Court of Appeal decision on these subsections, it is Barwon Spinners v Podolak [2005] VSCA 33 and it appears not yet to be reported, your Honour. The further details of how “serious injury” is to be interpreted are really of no consequence here.

GUMMOW J: Is 134AB of the larger State statute a law which could be properly described as a law related to workers’ compensation?

MS TATE: Yes, your Honour. We would say that is properly described as a law with respect to workers’ compensation.

GUMMOW J: Within the meaning of the federal Act?

MS TATE: Within the meaning of 108A(7)(a).

KIRBY J: But if you get your licence under the federal Act you just do not worry about the State Act. You just walk straight out of it.

MS TATE: You walk straight out, yes, your Honour.

KIRBY J: So why do we need to know the detail of the State Act?

MS TATE: Perhaps I could just indicate that while the right to bring common law proceedings is preserved, it is not otherwise unregulated, your Honour. There are degrees of impairment assessments that have to be made under 104B by the Authority. There is provision for the worker to seek leave from a court, to proceed with the proceeding if they are not able to secure the right degree of impairment certificate authorised by the Authority and so on, so the common law rights are regulated under this Act, your Honour. It is not as though they exist outside of the general workers’ compensation legislation.

With respect to the liabilities of employers – and these are perhaps in a sense the more critical provisions – the principal provision in the larger Act is section 125A, which is at page 348, and it is subsection (2). That provides that:

Where a worker –

and “worker” is defined under section 5 in a fairly extensive way –

or a worker’s dependents are entitled to compensation in respect of an injury arising out of or in the course of any employment on or after 4 p.m. on 30 June 1993, the liability to pay compensation is to be assumed in all cases by the worker’s employer.

So it is the worker’s employer who has the liability to pay compensation, the direct liability.

HAYNE J: The word “compensation” where used there means, does it not, compensation for which the Act provides, and is used in contradistinction to the claims for damages dealt with in 134AB?

MS TATE: Yes, your Honour. The liability of an employer to pay damages at common law is clearly the liability which is the converse of the worker’s entitlement to bring those proceedings.

HAYNE J: Is this distinction between compensation or liability to pay compensation and recovery of damages dealt with specifically in the Act by specific provisions or is it simply a distinction assumed by the use of different expressions at different points in the Act?

MS TATE: Your Honour, the obligation to insure is spelt out as an obligation specifically to cover both the liability to pay compensation and the liability at common law - - -

HAYNE J: Yes, I understand that, and no doubt you will come to it. My point is anterior: is there a distinction drawn by the Act between liability to pay compensation under the Act and liability at common law?

MS TATE: There is a distinction, your Honour, in the sense that there is a host of provisions which relate only to the obligation to pay damages, whether it be non-economic loss or pecuniary loss and so on. So there is a set of provisions, particularly under 134AB which has 38 subsections about what kind of damages you can get, whether they are capped, the nature of the damages and so on. That is, as it were, a code for the liability with respect to common law liability to pay damages.

HAYNE J: You say a code, Solicitor, but that is a very slippery expression.

MS TATE: Yes, your Honour.

HAYNE J: It assumes the pre-existence of the common law of negligence, does it not, and in that sense to speak of a code is incomplete, is it not?

MS TATE: I accept that, your Honour.

HAYNE J: Is there any specific provision of the Act which deals with this distinction between liability to compensation under the Act, that is, is there a definition other than what we see in section 80(1) to which we should have regard when we come to read the Act and understand what is meant by “entitlement to compensation under the Act”?

MS TATE: Your Honour, I will attempt to uncover any such provision if it is there in that Act. I certainly have not yet been able to find any such provision, but, certainly, your Honour, if such a provision is found, we will alert your Honour to it.

But if I could refer your Honours then to the State Insurance Act which is the slim Act, the Accident Compensation (WorkCover Insurance) Act 1993 - and I have already referred your Honours to section 5 of that Act now twice I think, your Honours, on page 4 about the guidance on construction - the critical provision for these proceedings is section 7(1)(a) which appears at page 5 of the reprint, and that provides that:

An employer who in any financial year employs a worker within the meaning of section 5(1) of the Accident Compensation Act 1985 –

(a) must obtain and keep in force a WorkCover insurance policy with the Authority –

that is, the Victorian WorkCover Authority –

in respect of all of the employer’s liability under the Accident Compensation Act 1985 and at common law or otherwise in respect of all injuries arising out of or in the course of or due to the nature of all employment with that employer on or after 4 p.m. on 30 June 1993; and

(b) must not any one time keep in force more than one such policy.

Now, the WorkCover insurance policy is defined in section 3 at page 3 to mean “an insurance policy issued in accordance with this Act”. Then section 9, which is at page 11, sets out what the WorkCover insurance policy must contain:

(1) A WorkCover insurance policy must only contain such provisions as are prescribed by this Act and any other provisions approved by the Authority.

(2) A WorkCover insurance policy must provide that –

(a) the Authority as well as the employer is directly liable to any worker or other person insured under the policy and, in the event of the worker’s death, to the dependants or other persons to pay the compensation under the Accident Compensation Act 1985 and at common law or otherwise for which the employer is liable; and

(b) the Authority is bound by and subject to any judgment, order, decision, award or determination given or made against the employer of any such worker in respect of the injury or death for which the compensation or amount is payable.

(3) A liability under a WorkCover insurance policy . . . is enforceable as if the worker or other person were a party to the policy.

Then under section 15 which is at page 15, provision is made for the Governor in Council to make various premiums orders and those orders specify under (1)(a):

the methods to be used in calculating premiums payable by an employer for a WorkCover insurance policy; and

(b) prescribing or specifying any matter or thing required or permitted by this Act to be prescribed or specified by a premiums order.

Then at section 17 which is at page 17 of the reprint:

The premium payable by an employer for a WorkCover insurance policy must be calculated in accordance with the relevant premiums order.

Then at section 26, which is page 26, the premium that is payable by an employer must be “payable in accordance with the relevant premiums order”. Then at section 8, which is at page 10, it sets out the basis upon which the premiums are generally calculable, and that is by reference to the rateable remuneration of the employer. Subsection (1) provides:

The remuneration subject to a premium under this Act is remuneration that is paid or payable by an employer on or after 1 July 2005 in respect of services performed or rendered on or after 1 July 2005 by a worker whose employment is connected with the State of Victoria within the meaning of section 80 of the Accident Compensation Act 1985.

MS TATE: Yes, your Honour. Part 3, the licensing of WorkCover insurers, was repealed in 1998, your Honour, so there have - - -

GUMMOW J: The corollary of that is that in fixing these premiums under section 15 of the slimmer Act there is no market in play.

MS TATE: The premiums orders are used by the Authority. The premiums orders, for instance, indicate whether - - -

GUMMOW J: There is nothing here to say that in fixing the premium order there are what one might call market factors taken into account because there is a monopoly.

MS TATE: No, your Honour, it does not say within the legislation, but the premiums orders – they are particularly large documents, your Honours and they specify, for instance - - -

GUMMOW J: Is there any interaction between this State legislation and the federal Trade Practices legislation dealing with State monopolies, the sort of thing we looked at in NT Power?

MS TATE: That question has not arisen, your Honour.

GLEESON CJ: Presumably the WorkCover Authority pays a dividend to the State Government?

MS TATE: Mr Hanks appears for the WorkCover Authority, your Honour, and he might be in a better position to specify exactly what payments are made, but obviously employers who, for instance, run abattoirs, or something like that, may indeed have under the premiums orders a much greater premium to pay than those who conduct businesses where there is much less of a risk.

Your Honour the Chief Justice asked me who it is that issues the WorkCover policies. Your Honour will see in our first folder of extrinsic materials under tab No 1 the WorkCover Insurance Policy. A copy of that policy is set out. Your Honours will see on the first page of the policy, on the right-hand side column, there is a recognition of the obligation that is on the Victorian WorkCover Authority to indemnify the employer in respect of its liabilities. It states:

NOW THIS POLICY WITNESSES that in consideration of the payment of or the agreement to pay by the employer to the Authority the premium stated in the Notice if, during the policy period stated in the Notice, and thereafter to 4 pm on the last day of any subsequent period in respect of which this Policy is duly renewed and for which the premium is paid or agreed to be paid by the employer, the employer becomes liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of the employer (including any person to whom the employer is liable by force of section 10A of the Act to pay compensation) or becomes liable to pay by force of the Act any other amount in respect of the employer’s liability at common law or otherwise for any injury to any such person arising out of or in the course of or due to the nature of employment with the employer.

THEN, in every case, the Authority will indemnify the employer against all such sums for which the employer shall be so liable, subject to any excess payable by the employer under section 125A of the Act. The Authority will also pay all costs and expenses –

associated with that. Under clause 12 of the policy there is provision made in relation to the defence of proceedings and under clause 13 there is the right of subrogation provided for.

GLEESON CJ: Is there any other class of insurance business in which the Victorian Government has a monopoly?

MS TATE: I do not believe so, your Honour.

HAYNE J: Compulsory third party?

MS TATE: There is compulsory third party motor vehicle insurance under the Transport Accident Commission Act, the Act that this Court considered in the recent case of Transport Accident Commission v Sweedman, the matter that was heard in Adelaide, and there was extensive reference made to the provisions of that Act. With respect to the third party personal injury insurance, there is an obligation to insure with the Transport Accident Commission, which is to say that the registration of your motor vehicle actually contains a payment which is made for, as it were, an insurance policy with the Transport Accident Commission. With respect to all other forms of insurance, even motor vehicle insurance beyond that third party personal injury, there is no monopoly by the Victorian State.

GLEESON CJ: Thank you.

MS TATE: Now, your Honours, if I might move then from the Victorian legislation, which we submit has demonstrated that there is an insurance relationship between the VWA and employers with respect to their liabilities for workers’ compensation under the Accident Compensation Act and insofar as the Act preserves the common law liabilities - - -

KIRBY J: Could I just ask at this stage, you do not claim that under your Act you have or would be entitled to render it compulsory for a federal authority as such to be insured and to pay premiums under the Victorian statute, say a Federal Government department or some authority of the Commonwealth, the Administrative Appeals Tribunal, for example, in respect of its employees.

MS TATE: Well, your Honour, there is their requirement under section 80 that there be that nexus with Victoria.

KIRBY J: The Commonwealth has its own insurance power.

MS TATE: Yes, your Honour.

KIRBY J: And its employment, its power to employ employees and, therefore, there is a zone where, no matter what you enact, you are not claiming that your State accident compensation system or the insurance system attached to it apply to those authorities?

MS TATE: I think it has never been suggested that it apply to those authorities, your Honour.

KIRBY J: Right. Well, that is the first step and the second step is, take a body which though no longer an authority is now a private corporation, like Qantas or Telstra, but is still closely connected with federal regulation and is regulated. Do you say that they fall under the Victorian compensation scheme in respect of their employees within Victoria?

MS TATE: Your Honour, could I have an opportunity to reflect on both of those questions?

KIRBY J: Yes, of course.

MS TATE: I know I have sought to answer the first, but perhaps there might be a better informed answer if I have an opportunity to reflect on both of those, your Honour. I would seek to provide an answer to your Honour directly after lunch.

KIRBY J: Certainly. What I am thinking of is the Commonwealth’s written submission that you are endeavouring by a self-declared compulsory insurance obligation to exclude from the operation of federal law making both the federal insurance power and also the federal corporation and employment and other powers and that you just cannot do that. It is a bootstraps-type argument trying to elevate your zone of insurance into a wider ambit of operation to the detriment of powers which legitimately belong to the federal Parliament.

MS TATE: Yes, your Honour. That is certainly the way in which the Commonwealth puts its argument. But if I might now turn to the historical thesis which is made by the Commonwealth, this is the thesis that in 1897 or 1900 there was no form of compulsory insurance. If I might challenge that thesis by reference to the materials which are contained in the appellant’s second folder of extrinsic materials. We provided two folders of extrinsic materials to the Court. The second folder was supplied with our reply. The second folder includes under tab 1 a report by the Commonwealth statistician, a Mr. G. H. Knibbs, in September 1910 - - -

GUMMOW J: Just before we get back to 1910, can I have the bad taste to take you to the relief that you seek on page 92 of the cause removed book, your notice of appeal, in other words. You want a declaration that those provisions of the federal Act, to the extent that they – and then it is (iii) that I am worried about at the moment on page 92.

MS TATE: Yes, your Honour.

GUMMOW J:

(iii) With effect from the date that the licensed comes into effect, remove the corporation from the scheme of State insurance established –

That is floating really. That is why one would really need to know what it is in the State Acts that otherwise would be struck at by 109 but which are, by virtue of what you say about power, as it were, preserved or above 109. Could you give attention to that at some stage?

MS TATE: Yes, your Honour, certainly.

HAYNE J: That would require, it seems to me at least, to involve consideration of the way in which the common law liability of employers is dealt with under both Acts.

MS TATE: Yes.

GUMMOW J: In particular – is it 44 of the federal Act that deals with the common law?

MS TATE: Sections 44 and 45, your Honour.

GUMMOW J: Yes.

MS TATE: The Georgiadis provisions that – if I might return then to the second folder of extrinsic materials and the report of Mr Knibbs back in 1910, the previous year he had conducted a study throughout Europe on the development of what was called social insurance and I should make clear at the outset that we rely upon this report for a description of the social insurance programs in Europe from the early 1880s and would then seek to establish through independent sources that there was an awareness of those programs in Australia during the 1880s, that is before and about the same time as the drafting of 51(xiv). So, of course, we are conscious of the fact that this report itself was not published until 1910 but, as I say, we rely on it principally for its descriptions.

Now, if I might just highlight then some of the most significant aspects of the statistician’s report, firstly at page 11 there is a definition of “social insurance” and your Honours will see this under the heading “Social Insurance” where Mr Knibbs says:

In recent years there has been a remarkable development in the application of the principles of insurance, and among the branches which have reached a considerable scope and magnitude is that of social insurance.

One sentence down:

It is ordinarily employed, however, in a much more restricted manner, viz, to denote insurance of workmen as a distinctive class against sickness, accident, death, old age or other adversity. It is in this restricted sense that the term will be used hereinafter.

It then says there is a need to consider all of the general forms of insurance in order to describe it properly. It then says:

To meet the demand for social insurance a number of systems has been devised. Insurance or relief funds have been created, either on a compulsory or voluntary basis, by the central government, by national or by local bodies, by groups of working men, by industrial establishments, and by employers and employés operating conjointly; and, furthermore, commercial insurance companies have created industrial insurance departments, in which premiums are collected in small amounts and at frequent intervals. These various schemes of insurance, though under different forms and systems of organization and management, are all designed for the benefit of wage-workers and persons earning small salaries, and their purpose usually is (1) to compensate to some extent for the loss of wages or salary occasioned through accident, sickness, or other disability; (2) to obviate privation to dependants through death; and (3) to furnish - - -

GLEESON CJ: Why would premiums be collected in small amounts and at frequent intervals if they are being collected from the employer?

MS TATE: In some of these schemes, your Honour, there was a co-operative arrangement whereby workers provided some of the funds and employers provided some of the funds and all of that money was held in a central fund or trust for the purpose of compensating workmen when they suffered injury. It states, then, in the third paragraph that:

This Report does not enter the field of industrial departments of insurance companies –

that is, private insurance –

it is limited to a study of systems of social insurance on a national and compulsory basis, or on a voluntary basis but under the control of the central government.

Then on page 12, the long paragraph, there is a mention of various theorists who influenced the development. Then, at about point 6 of the page, he says

an actual working example of a scheme of social insurance existed much earlier –

than modern times –

viz., in the . . . (miners’ associations and miners’ funds) of Prussia and Austria. These can be traced back to the 14^th century; but it was not till comparatively recently, viz., 10^th April, 1854, that the first law was passed making compulsory the creation of such funds. The law required contributions from the miners and their employers, and fixed by regulation the management of the organizations . . . It may be added that Schaeffle (1831-1903), who did much towards creating the existing forms of social insurance -

He is described in the extract from Boyd which we have under tab 2 at page 36 as the father of compulsory State insurance. Clearly there, State insurance is being used in the sense of national or governmental insurance. Then, at page 14, about point 3, he says:

Prior to the modern movement in the direction of social insurance, the prevailing law of Europe was substantially that known as the common-law liability of employers, and was founded on the ancient Roman law . . . This principle, briefly stated, was that the employer is liable only for those accidents resulting directly from his fault or the fault of his agents, whose orders the injured person was in duty bound to follow, the burden of proof being upon the employé . . . Under the above rule, therefore, it was, with few exceptions, upon the employé that fell the loss caused by accidents . . .

The first modification demanded was that the law be so changed that the employer should be liable unless he could prove that he was in no way at fault . . .

Practical results, however, soon showed that the position of the employé had undergone but little improvement.

So reverse onus of proof was not of any assistance. Further down the paragraph:

The desire for more certain and immediate compensation in cases of accident grew apace. It is at this point that the agency of insurance has been invoked. By this agency it is sought to compel employers either to insure their employés in a State or private insurance institution, or themselves to maintain insurance funds, and to thus secure the position of the workmen by establishing in advance the amount and nature of the compensation to be granted, and by ensuring its immediate payment. From a merely legal question, therefore, the liability for accidents to workmen has, by a natural process of evolution, passed into a social question, viz., that of workmen’s insurance.

Then at page 16 at the bottom of the page he says:

The full scope of social insurance was first recognised in Germany. This country was rapidly developing from an agricultural State into an industrial one, and the consequences of this change brought the conditions of workmen to a certain climax, resulting in proclamations regarding socialism . . . It was not, however, until Bismarck had come to the conclusion that the best way to counteract the growing influence of social democracy, which he regarded as an evil, was to improve the social position of the working classes as much as possible by means of measures introduced by the government, that an extension of the principles underlying the creation of the miners’ funds above mentioned to the majority of the wage-earning classes took practical shape. It was on the 17th November, 1881, that the Imperial message recommending the establishment of various social insurance systems was communicated to the Reichstag.

Halfway down the page:

The message recognised that the State alone would be unable to carry out the task, and demanded the co-operation of the whole people affected and their association in corporations under the care and the supervision of the State. It also recognised that the expenditure of considerable sums on the part of the State would be necessary. In spite of great opposition, the full scheme was put into practical form within ten years, so that to-day Germany unquestionably leads the world in social insurance –

He then says just above the table:

The following statement shows how the different European countries have followed suit; the systems are voluntary, except where otherwise specified:-

and this table is reproduced in the annexure to our reply, but under the column of “Accident Insurance” your Honours will see that it says, Germany “1884 and 1887, compulsory”; Austria “1887 and 1894, compulsory”; Hungary “1907, compulsory”; Italy “1898 and 1904, compulsory”; Finland “1895 and 1902, compulsory”; Holland “1901, compulsory”; Norway “1895, compulsory”; Sweden 1891 but voluntary, France “1898, compulsory, seamen only”; Belgium “1868, compulsory, miners only”; Great Britain “1897 and 1906 (Workmen’s Compensation Act”, a voluntary scheme within Britain.

Now, it is our submission that this shows that there was an existence of compulsory insurance for industrial accidens which was largely subsidised by the State and regulated by the State at a time before 1900 and before 1897. Then on page 20 of the report - - -

KIRBY J: It also tends to show the importance to the success of compulsory insurance of universal systems of regulation that provide for such insurance. But, of course, all this has to be fitted in the Australian context into a federal system which, save for Germany, which I think in Imperial Germany was a kind of federation, was not the feature of the European governments mentioned on page 17.

MS TATE: No, I accept that, your Honour, but there would - - -

GLEESON CJ: But workers’ compensation insurance has been compulsory in Victoria for a century, has it not?

MS TATE: Since 1914, your Honour.

GLEESON CJ: But it has not been a monopoly - - -

MS TATE: It has not been a monopoly, no.

GLEESON CJ: - - - until 1998.

MS TATE: Yes, your Honour.

GLEESON CJ: If State insurance embraces not only making insurance compulsory but also giving the State Government a monopoly on insurance business, what is the content of the Commonwealth power to make laws with respect to insurance?

MS TATE: Your Honour, we would say conversely that if the Commonwealth has under its insurance power the power to regulate the milieu or industrial environment of insurance throughout Australia and is not restricted with respect to insurance engaged in by the State, then the Commonwealth could equally make a law which said that no Victorian employer need be obliged to take out insurance for workers’ compensation liabilities, or the Commonwealth could go further and say not only was that the case but all employers in Victoria must insure their workers’ compensation liabilities with the Commonwealth of Australia, and there would be a federal monopoly.

Your Honour, it is our submission that it was not envisaged by the framers of the Constitution that the first limb of 51(xiv) could be so extensive as to permit the Commonwealth to establish a monopoly of federal insurance and prohibit the State and State employees from being insured by the States. I accept the difficulty implicit in your Honour’s question that at one level it might seem an odd consequence that the State could establish a monopoly.

We would say that term “monopoly” has about it immediate pejorative overtones that might be met when one considers the reason for establishing such a system, whether they be concerned with, as Justice Kirby has said, the funding arrangements or whether they be concerned with the guarantee of entitlements to workers or the control of premiums or whatever, but we would say insofar as there is a curiosity that that is permitted under our submissions, we would say it is a similar curiosity for the Commonwealth Solicitor-General to meet that it is a consequence of his submissions that the Commonwealth could have a monopoly throughout Australia with respect to insurance regardless of whether or not a State had established a State insurance business. Our submission is that that is equally as curious.

Your Honour, if I could refer to page 20 of the Knibbs Report where at the top of the page there is a description of the “International Congresses on Social Insurance” that were being conducted. He says that:

The importance which the problems of social insurance are assuming in Europe is shown by the fact that there have been no less than eight International Congresses, whose object was to discuss all the fundamental questions of social insurance, viz., those held at Paris (1889), Berne (1891), Milan (1894), Brussels (1897), Paris (1900), Düsseldorf (1902), Vienna (1905), and Rome (1908).

The attendance at these Congresses is large, and their reports are voluminous, and deal with a variety of aspects -

Then he sets out a table with the “INTERNATIONAL CONGRESSES ON INSURANCE”.

GLEESON CJ: One of the most important forms of social insurance that they were concerned with are what we would now call medical and hospital benefits.

MS TATE: Yes. Some of them indeed were, your Honour. There is a discussion within the report about unemployment insurance and the difficulty of trying to establish any form of compulsory unemployment insurance and they say that that difficulty lies in part with the fact that it is not possible to make any definite actuarial calculation of the risk and that that is one of the inherent features of the establishment of insurance. But there is not only consideration for unemployment but also sickness and invalid and what they have called here medicine insurance. Certainly, amongst the subjects discussed, and this is apparent from point 7 of page 20, that:

The subjects discussed, both scientific and practical, at the different Congresses had reference to accidents to workmen and workmen’s insurance, as well as to the far-reaching connexion of the latter with other institutions of modern civilization.

He then goes on to consider social insurance in Germany and he discusses on page 21 the particular Acts that were introduced and he sets out in a table, in particular there is a reference made to the “Act for Insurance against Industrial Accidents” which was passed on “6^th July 1884”.

Then on page 22 he explains the reason for compulsion. At about point 3 of the page under the heading “Fundamental Principles of Acts” he says:

The fundamental principles of the German system are compulsory insurance on the one hand, and far-reaching freedom of action on the other. As a result of experience with voluntary insurance, compulsion was deemed to be indispensable, inasmuch as under the voluntary system only the better paid and more thrifty classes of workmen were reached.

He then goes on to say in the next paragraph:

According to the German law each insurance organization, whatever form it may have adopted, must be under the supervision of the State, and in Germany it appears to be an open question whether all such organizations will not in course of time be transformed into institutions wholly organized by the State.

Now, we say there that although, as your Honours have said to me, there was no State insurer that had a monopoly within any of the countries in Europe save for Norway, which may not be seen as of particular significance, there was an understanding, in our submission, of the special role played by the State with respect to this form of insurance, and there was an anticipation that ultimately the institutions might be wholly organised by the State.

Then at page 25 he discusses in more detail the nature of the insurance – the type of liabilities insured against and the type of premiums that had to be paid, and perhaps I could just refer your Honours to halfway down – it is about point 8 of the page where he talks about the premiums and he says:

The premiums are paid by assessments on the employers (who pay the whole thereof) –

this is in Germany, your Honour –

levied according to the total wages paid and the scale of risk in the industry and establishment. This arrangement makes it to the interest of individual employers to guard against accidents.

I refer your Honours to that simply because when I took your Honours to the rateable remuneration provisions which served as the basis for premiums to be paid within Victoria under the Victorian system, it was really along precisely the same lines. At page 35 there is a discussion of Austria. At about point 8 of the page:

public opinion turned in favour of the introduction of compulsory insurance on the German pattern. Compulsory insurance against accidents was established in Austria by an Act passed on the 28th December 1887.

There at about point 9 of page 36:

the employers only pay 90 per cent, and the employees 10 per cent, while in Germany the employers pay the whole.

Then at the bottom of the page:

As in Germany, all accidents are indemnified without need to prove negligence.

So this is a no-fault accident compensation scheme. Then, your Honours, there is a discussion of Hungary at page 40, and at page 42 a discussion of a Bill that was introduced in 1890. That is about point 2 of the page. Then at page 44 there is a discussion of Italy. Here it says at about point 5 of the page that:

Italian legislation has taken up and developed in a remarkable way both insurance against accidents –

and the other forms of insurance your Honour the Chief Justice mentioned to me, namely against invalidity and old age:

The former is compulsory, but the choice of the insurance institution is left free to the insurer, while the latter is voluntary.

At the bottom of the page there is a note that:

It thus became evident that voluntary insurance –

for an accident insurance scheme –

would not lead to any satisfactory result.

Then at page 45:

The long period of legislative preparations which resulted in the Act of 17th March, 1898, providing for compulsory accident insurance -

Then on page 47 there is a description of the features of the system, whom the employers can insure with or whether they can function as self-employers. Then at page 49 there is a mention of a national fund which was established by the State and that national fund despite its name was actually quite independent in its administration from the State, and as a matter of fairness I would alert your Honours to that. At page 52 there is a discussion of Finland at point 5 of the page:

In Finland, accident insurance is compulsory . . . Social insurance in Finland, both generally, and more especially in regard to its method of organization, appears to have been considerably influenced by German traditions.

At page 53 there is the chief features of the system and it is stated that:

Such insurance can be effected in any of the insurance institutes approved by the Government.

So, again, that is the same as many States in Australia have provided for. In Holland, page 58, point 5 of the page:

In Holland, accident insurance is compulsory, sickness insurance is voluntary . . . Insurance against accidents is governed by an Act passed in 1901 –

and there is mention on page 59 at about point 3 that a State bank had been established for the purpose of providing this insurance, and then at page 62 there is a mention of social insurance in the Scandinavian States, at point 8 of the page:

2. Different systems – Accident insurance is compulsory in Norway, voluntary in Sweden and compulsory in Denmark for seamen and officers of ships only.

Bottom of the page:

In 1885, a Royal Commission was nominated in Norway for the purpose of making an investigation into all matters concerning the protection of workmen, legal liability and workmen’s insurance. This Commission submitted in 1890 draft Bills on insurance against sickness and accidents. The majority of the members of the Commission was in favour of compulsory insurance.

Page 63:

In 1894, insurance against accidents was established. The above-mentioned Commission based its project mainly on the German-Austrian example, and accepted by the “Storthing.” The Act received the Royal sanction on 23 July, 1894 –

Chief features of the system: it insures against accidents, chiefly industrial workers. Then the central role of the State is recognised at about point 3 of the page:

The working of the system of insurance against accidents is intrusted to a State insurance institution, extending over the whole kingdom, which institution is authorized to effect also certain voluntary insurances. The costs of administration are borne by the State Treasury . . .

The premiums are fixed partly according to the amount of the wages and partly according to the class of danger to which the respective occupation is exposed.

Then in France, at page 64 at about point 5 of the page, there was:

dislike for the idea of State “compulsion,” [so] the development of any comprehensive scheme of compulsory insurance has been retarded.

There were a variety of organisations, including State insurance institutions. There were three State insurance institutions that had been organised and, in particular, under paragraph (c) at about point 7 of the page, there was an institution that provided for assurance against accidents. That was created by an Act of 1868 and - - -

KIRBY J: Could I just ask, so that I know where we are going, is the purpose that you are referring us to this part of Mr Knibbs’ report to indicate that early in the Commonwealth, by reference to events that preceded the establishment of the Commonwealth, forms of compulsory insurance were well known in the world and, therefore, to the extent that the Commonwealth Solicitor-General’s submissions suggest that on some sort of originalist view you should read down the provisions of section 51 here in question by reference to exclude compulsory insurance just does not gel with what was known and existed at that time? Is there anything more that you seek to get out of this report?

MS TATE: No. Essentially, your Honour, we rely on the report to support the proposition that before the 1890s there was in different countries in Europe well-developed programs of compulsory no-fault insurance against industrial accidents.

GLEESON CJ: We know, I think, that at the time of Federation there was a New Zealand Government insurance office or company.

MS TATE: Yes.

GLEESON CJ: What class of business did it write?

MS TATE: That was life assurance, your Honour. It was not workmen’s insurance. But I think around 1900 – and I will be able to tell your Honours precisely after lunch – it is either 1900 or 1901 it extended its insurance business to include industrial accidents.

GLEESON CJ: Did it have a monopoly of any class of business?

MS TATE: It did not have a monopoly, your Honour, is our understanding.

HAYNE J: Now, Mr Knibbs in his report at pages 84 and following dealt with the policy of social insurance in Australia and he referred, amongst other things, to the place played in Australia by the friendly society movement, a place occupied in Britain by such organisations, but at page 85 in paragraph 3 at about point 2 of the page, “Accident Insurance Companies”, he discusses the role of accident insurance. You then find in the second paragraph under that subheading commencing:

Even if the operations of existing companies should be somewhat restricted by the institution of State insurance, this could hardly be regarded as a sound objection –

etcetera. At some point, not on your feet, could you point me to any other use by Knibbs in this report of this notion of State insurance that might cast some light on precisely what it was he was talking about in that passage that there appears.

MS TATE: Yes, your Honour.

HAYNE J: As I say, that is something I think to go away and find rather than deal with instantly.

MS TATE: Yes, your Honour.

KIRBY J: You might find it helpful to go to pages 99 at the end of the report where it talks of what he thinks should be done, because I do not think he is using State insurance in the constitutional sense, I think he is using it in the sense of government insurance, and at the very end of his report he refers to a recommendation that had been made for a federal commissioner of insurance concerned with life insurance which had come in a report of a Royal Commission on insurance and, being a federal officer, he was mainly directing his attention to federal initiatives. I do not think he was focusing on our issue.

MS TATE: Yes, we understood Mr Knibbs to be using the term “State insurance” simply to mean national or governmental insurance. He does not seem to have turned his mind at all to questions of federation within Australia or whether there would be any constitutional inhibition on the establishment of a national social insurance program within Australia. But, your Honour, I will seek to answer Justice Hayne’s question in further detail after lunch, but that would be our immediate response, your Honour.

KIRBY J: In a sense, it is a nice question as to what would have happened if the Federal Parliament, thrilled with Mr Knibbs’ report, had so many years before initiatives in insurance were taken, had moved into this territory and created under the insurance power national systems of accident, sickness and health, unemployment insurance, and then later the States had come along and said, “Well, steady on, we have got our zone and we want to enact our law”. That would really test the extent of the zone that belongs to the States. That is not the way things developed.

MS TATE: That is not the way things developed but it is a very interesting question, your Honour, that - - -

KIRBY J: Could you bump the federal legislation out at that stage by saying, “Well, we’re going to enact laws for our corporations and our agencies and authorities and you can’t intrude into that area”?

MS TATE: It is difficult to say what might have developed historically, your Honour, but certainly in the Knibbs Report he does not seem at all to be mindful when he comes back to reflect upon Australia that there would be a need to consider the particular and peculiar constitutional framework within Australia.

KIRBY J: What you have read to us does at least seem to have this relevance to the case before us, quite apart from showing what was in the minds of people at the time our Constitution was written, that part and parcel of successful social insurance, including accident insurance, seems to have been systems of compulsory insurance covering very large numbers in order to get the pool of premiums that were necessary for the success and to cope with the risks of that kind of broad social insurance.

MS TATE: Yes, your Honour, indeed. I need not labour further the propositions I think for which we rely upon the Knibbs Report. A detailed examination probably speaks for itself. If I might then refer your Honours to the extracts from a book by James Harrington Boyd, and this appears under tab 2 of our second folder of extrinsic materials. This is a book entitled “Workmen’s Compensation and Industrial Insurance Under Modern Conditions”. It was published in 1913. It is an American text.

GUMMOW J: I think it refers in paragraph 117 to Queensland legislation at 1905 and at 119 to South Australian legislation of 1900.

MS TATE: Yes, your Honour. There is a further description of those laws in Boyd itself in the chapter called “Summary of Foreign Compensation Laws”. This is at page 205 of that report. It is chapter IX. It is a little way in after the first couple of chapters called “Summary of Foreign Compensation Laws”. That chapter summarises the laws in each of the jurisdictions named and considers the insurance requirement for each jurisdiction and that includes consideration of Queensland, South Australia - - -

GUMMOW J: Yes, paragraph 117, South Australia 119.

MS TATE: Yes.

GUMMOW J: Any other Australian - - -

MS TATE: Western Australia, Queensland, South Australia and Western Australia 122.

GUMMOW J: Thank you. The book was published in 1913, was it?

MS TATE: It was published in 1913, your Honour, but it gives a description of the theories that were developing pre-1900. If I could refer your Honours first to page 15 of the extract from Boyd, in the discussion of the inception of the movement for these laws he says:

The movement for the enactment of more just and humane laws to take the place of the outgrown common-law remedy for the compensation of workmen for injuries received in the course of their employment became widespread in the United States about the beginning of this century.

Then on the following page he talks about the previous investigation of the problem. He says:

Every civilised nation in Europe and many other nations in other parts of the world except the United States have discarded the old system of Employer’s Liability based upon fault and substituted a system under which every industry bears the burden of relieving the distress caused by injuries to workers in any given industry practically without litigation. The German system of insuring the workers in all of its industries against sickness, accidents and old age, was inaugurated during the period from 1883 to 1887 . . .

Great Britain enacted her Compensation Act in 1897 –

and I will take your Honours to that Act in a moment. It is not an Act which imposed a compulsory requirement to take out insurance, but it did remove certain defences which an employer could have otherwise relied upon. At the bottom of the page he talks about:

The prime mover in the adoption of the German system was Prince Bismarck. In England these laws were ably championed by Lord Salisbury and Mr. Chamberlain.

The subject first attracted the attention of legislative agents in the United States in 1893 when the investigation of the German system by John Graham Brooks was published in The Fourth Special Report of the Commissioner of Labor of the United States, Carroll D. Wright.

He then discusses a Chicago conference of 1910 and 1911 and states at the top of page 22 under paragraph 12 that there had been State commissions established as well and he said:

Since the Chicago Conference of Commissions and during the year 1911 and the first six months of 1912 the legislatures of the states of Ohio, Washington and Massachusetts have enacted Workmen’s Industrial Insurance Laws and New Hampshire, New Jersey, Illinois, Michigan, Wisconsin, Kansas, Nevada, Rhode Island and California have enacted Workmen’s Compensation Acts. During the Spring of 1909 the Montana legislature enacted an Insurance Compensation law affecting the employés of mines only.

Then he mentions at the bottom of the page a question about the State and he refers to a message from President Roosevelt that:

Where the nation has the power it should enact the laws to this effect. Where the Sates alone have the power they should enact the laws.

Then, at page 103 – sorry, your Honours, I think that might be - - -

KIRBY J: Footnote 7 on page 23 refers to the enactment of the federal - - -

MS TATE: The making of the federal Act, yes, your Honour, and approved by President Roosevelt and passed by Congress in 1908. Of course, those periods of times are times after Federation within Australia but - - -

KIRBY J: So the mind asks you can have a federal employees compensation, you can have a federal system of regulation of entitlements and insurance for federal agencies and authorities, you can even have it now for federal privatised corporations, so what is so wrong with having it for those that are in competition and would, but for the change of privatisation, have been similarly federal bodies? This is just part of federal regulation of relevant federal concerns. To the extent that you enact compulsory insurance, trying to pick them up, move out, this is a federal Territory.

MS TATE: Yes, your Honour. I might just give the reference on page 36 to Dr Schaeffle being the father of compulsory State insurance, it is about point 2 of the page. It is said:

He conceived the plan in the year 1867 or prior thereto.

Then on page 37 at the bottom of the page, Boyd notes that:

State insurance was a matter of German origin.

It says:

State insurance was long an economic and social theory before it became a fact, and the general principles to which the theory appealed for its sanction were used in Austria, France and England with frank acknowledgement that Germany had originated the idea out of which it all grew.

I have already referred your Honours to chapter IX which is at page 205 which just summarises each of those countries and I will not take your Honours to them. Your Honours will see that that is a rather comprehensive description of those various jurisdictions.

GLEESON CJ: Has the Commonwealth Parliament, under section 51(xiv), power to make laws with respect to professional indemnity insurance?

MS TATE: Would the Commonwealth have such a power? Yes, indeed, your Honour.

GLEESON CJ: Would it have power to make professional indemnity insurance compulsory?

MS TATE: We would say yes, your Honour, subject to the restriction.

GLEESON CJ: I was going to ask then, what – I am coming to the restriction, but a power to make professional indemnity insurance compulsory presumably embraces a power to prescribe the limits up to which you have to insure.

MS TATE: Yes, your Honour.

GLEESON CJ: So the Commonwealth Parliament can say all barristers have to insure themselves for liability for professional indemnity up to a limit of $5 million, for example.

MS TATE: Yes, your Honour.

GLEESON CJ: What operation then would the exception or excision have in relation to that subject matter?

MS TATE: Well, your Honour, we would say that it would be a matter of - - -

GLEESON CJ: What if there was a State law that said professional indemnity insurance is compulsory up to $6 million?

MS TATE: If that was with a private insurer not regulated by the State, we would say that the federal law prevailed, simple 109.

GLEESON CJ: Now what if it said, if the State Parliament said, professional indemnity insurance up to $6 million is obligatory and you have to insure with the State Government Insurance Office?

MS TATE: If a State law said that – well, we would say in those circumstances, your Honour, that the Commonwealth law insofar as it removed the effect or dissolved the obligations under the State law would be to that extent a law with respect to State insurance and would need to be read down in order to preserve its validity. Were there to be no State law which imposed such a requirement, then under the first limb of 51(xiv) the Commonwealth could indeed impose an obligation to insure with the Commonwealth with respect to professional indemnity insurance up to whatever limit the Parliament of the Commonwealth chose.

GLEESON CJ: I was not postulating an obligation to insure with the Commonwealth. I was just postulating an obligation to insure.

MS TATE: Or just an obligation to insure, yes, your Honour. We accept the general and otherwise unlimited nature of the insurance power, that it encompasses all classes of insurance, marine insurance, fire insurance, life assurance. Within the Convention Debates there was a suggestion that there be an amendment to expressly make reference to life assurance, to assurance, and it was held that the meaning of “insurance” would be so – it was intended to be so general that it would simply fall within the general broad category of insurance.

GLEESON CJ: It would also cover hospital and medical benefits.

MS TATE: Also hospital and medical benefits insurance, yes, your Honour, and, of course, there is an express power in relation to invalid pensions and so on.

KIRBY J: But a narrower view must have been taken earlier in the century about that, otherwise they might not have needed the amendment to provide for medical and hospital benefits. I wonder why that was. I wonder why they took a narrower view of the insurance power that led to the enactment of I think it was the 1942 or 1944 amendment.

MS TATE: Yes, your Honour, it is certainly an interesting question. Would that be a convenient time, your Honour?

GLEESON CJ: Yes, certainly. We will adjourn until 2.15 pm.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2 16 PM:

GLEESON CJ: Yes, Solicitor-General.

MS TATE: May it please the Court. Might I first respond to some of the questions asked of me this morning. I was asked whether existing Commonwealth authorities with employees in Victoria are subject to the Victorian legislation. Our response is that those Commonwealth authorities are not subject to the State Act but I was then asked whether former Commonwealth authorities are, in principle, subject to the Victorian legislation and our response to that, your Honours, is that if the former Commonwealth authority has been fully privatised, then it is in principle subject to the Victorian legislation but in practice I am instructed that that has not been enforced. With respect to the pleading question and the relief that was sought in the notice of appeal - - -

KIRBY J: Can I just get a little clarification of that? In practice it has not been enforced so if you get a body like Optus they have to know which regime they fall into because they have to actually pay premiums and there may be different premiums, so what actually happens?

MS TATE: No, your Honour, Optus is not a Commonwealth authority and has never been a Commonwealth authority.

KIRBY J: Yes. Take Qantas.

MS TATE: Your Honour, Optus has become licensed because it is in competition with a former Commonwealth authority. That former Commonwealth authority is Telstra and Telstra - - -

KIRBY J: Yes, I realise that is a special – I withdraw the question about Optus and I ask the question in relation to a former authority such as, I think, Qantas at one stage was a statutory authority of the Commonwealth, or there would be the Grain Board that is now privatised which we looked at in Neat which is now the Australian Wheat Board. What about a body like that? What about its employees in Victoria?

MS TATE: Again, in principle, such a privatised body freed from its Commonwealth source of creation is, in principle, subject to the Victorian legislation and it appears that Qantas may be required to take out a WorkCover policy but, your Honour, those matters as to what the Authority does in relation to former Commonwealth authorities are perhaps best responded to to your Honours by Mr Hanks who appears for the Authority - - -

KIRBY J: I see. You are flicking that one to Mr Hanks.

MS TATE: He appears for the Authority, your Honour.

KIRBY J: We will save all our questions up for him then.

MS TATE: Your Honours, if I could turn to the pleading question simply to say this, that with respect to the relief sought under paragraph 9(2)(a)(ii) of the notice of appeal we accept that there is maybe a need for greater particularisation and we seek to provide in writing a substitute paragraph for the notice of appeal tomorrow morning and we are conscious that it may involve quite deep issues, your Honour. We have to confront those issues, but we understand it is not just a pleading point.

The questions asked by Justice Hayne earlier this morning are ones that we will respond to in due course, in particular whether Mr Knibbs offered any definition of “State insurance” at any stage throughout that report. Now, your Honours, I had taken you to the report of Mr Knibbs and to the extract from the Boyd book and before considering what knowledge within Australia there was of those systems within Europe at about the time of Federation might I first refer to the pre-1900 changes to employer’s liability that was occurring in the United Kingdom and could I refer your Honours to the Employers’ Liability Act 1880 which is behind tab 4 in the first folder of extrinsic materials filed by the appellant. Your Honours will see there in section 1 provision is made:

Where after the commencement of this Act personal injury is caused to a workman –

This is tab 4, your Honours, of the first folder. If personal injury is caused to a workman then at the end of those subsections it is provided that he:

shall have the same right of compensation and remedies against the employer as if the workman had not been a workman of nor in the service of the employer, nor engaged in his work.

In effect, that section 1 of the 1880 Act was to remove what was called the defence of common employment. That was a defence that an employer could rely upon to say he was not liable if injury had been caused by a fellow employee. This effectively placed the employee in the same position as a stranger and that is why the terms of the legislation is cast in the way that it is. This is the first major recognition of an employer having a liability to an employee which was not founded on the negligence of the employer. The other two major defences remained at this point contributory negligence by the employee and the voluntary assumption of risk. There was no requirement under the 1880 Act to take out insurance. The 1880 Act was followed almost slavishly by the colonial legislatures. First, South Australia in 1884, New South Wales in 1886 and the colony of Victoria in its 1886 Act. A copy of that is to be found behind tab 5 of that first folder of extrinsic materials and it is section 3 of that Act which replicates almost in terms section 1 of the British 1880 Act. The parliamentary debates in the colony of Victoria in relation to the 1886 Act are to be found behind tab 11 and if I could refer your Honours to those debates.

HAYNE J: In aid of what proposition, Solicitor?

MS TATE: In aid of the proposition principally, your Honour, that it was recognised at that time that an employer who now had a liability with respect to employees even if the employee was injured as a result of the negligence of a fellow employee, that that was an insurable interest. That proposition is made good, in our submission, at page 454 at about point 6 of the page of the parliamentary debates.

GLEESON CJ: None of this is controversial is it?

MS TATE: It may not be controversial, your Honour, but it is simply to demonstrate – well, it is controversial in this sense, your Honour, that it is put against us that the words “State insurance” had a strict and narrow meaning in 1900, that it did not extend to include compulsory insurance and that while we respond by saying that there were such schemes of insurance throughout Europe, it would also be incumbent upon us to show that there was some knowledge of those schemes within the colonies and this is the first step of establishing that there was such a knowledge. So the first step is just that there was a recognition, with that change to the law of employers’ liabilities, that employers had an insurable interest.

GLEESON CJ: Whatever the expression “State insurance” means in paragraph 14, it has to be something that is capable of extending beyond the limits of the State concerned.

MS TATE: Yes, your Honour.

GLEESON CJ: I thought it was common ground that “State insurance” meant State Government insurance?

MS TATE: Yes, your Honour.

GLEESON CJ: And “State insurance extending beyond the limits of the State concerned” presumably means the activities of a State Government insurer that extend beyond the limits of the State boundaries, along the lines of what Mr Higgins said in the course of the Convention Debates.

MS TATE: Yes, your Honour, but - - -

KIRBY J: Perhaps it extends to the policies and the entitlement to indemnity beyond the State concerned.

MS TATE: Beyond the State concerned.

KIRBY J: Not just the activities of agents. I think it is the insurance that extends and insurance, one would think, would include the writing of policies and provision of indemnity.

MS TATE: In relation to persons outside of the State, yes, your Honour. I am sorry, your Honour, I might not be appreciating the way in which that contests what had been proposed before you, but perhaps I can move through some of that legislation.

GLEESON CJ: A State’s creation of a monopoly of insurance is not likely to extend beyond the boundaries of the State, is it?

MS TATE: No, your Honour, indeed.

GUMMOW J: Why is that?

MS TATE: Why not, your Honour?

GUMMOW J: Yes.

MS TATE: Well, clearly the question of whether or not there should be a monopoly and what advantages can come from that monopoly are just questions of policy for the Parliament, but one would have understood certainly from the Convention Debates that there is a degree of protectionism about the measure. I mean, there is a concern about New Zealand insurance, whether New Zealand government insurance might extend to Australia. Then the suggestion is made that for each of the States they ought to be able to control the business of insurance conducted by the States within the boundaries of the State.

GUMMOW J: Does section 118 then operate on that? Would section 118 operate on a purported State monopoly?

MS TATE: This is 118 of the - - -

GUMMOW J: That spoke beyond the territorial limits of the State?

MS TATE: Your Honour, perhaps I am just best to respond by saying that the restriction within 51(xiv), certainly the rationale for it in the Convention Debates is a protectionist rationale. Whether or not that is regarded as good policy today, the rationale for that restriction was a protectionist rationale and therefore one would have thought they considered that to be effective to ensure that even if a State insurer did wish to establish a monopoly within the boundaries of the State, would be unable to extend that beyond those limits. But, your Honours, if I could just return to the imperial legislation - - -

GUMMOW J: There is an ambiguity in this expression “beyond the State”, is there not, because the territorial connection in section – is it section 80?

MS TATE: Yes, your Honour.

GUMMOW J: It talks about connection with employment, for example, “usually works”, and then there are special provisions about ships. So it is not some sort of watertight notion in the Accident Compensation Act.

MS TATE: No, it is not a watertight notion.

GUMMOW J: The monopoly then bites on that, does it not?

MS TATE: There are loose expressions such as “usually works”. There is no definition of what it is to work usually. Clearly that would be subject to judicial interpretation. But nevertheless a nexus has sought to be provided with the State.

GUMMOW J: But that is for the purposes of peace, law and good government of the State and those sort of - - -

MS TATE: Yes, your Honour. Yes, of course.

GUMMOW J: There is Union Steamship - - -

MS TATE: Union Steamship v King, yes, your Honour.

GUMMOW J: It is not necessarily the same thing with the insurance power.

MS TATE: Yes, your Honour. There is certainly an attempt to provide the required nexus. Your Honours, after the Imperial 1880 Act there was a much more radical Act of the Imperial Parliament in 1897 which was called the Workmen’s Compensation Act and this received a commentary by Addington Willis and that commentary has been provided to your Honours. It was provided to the Court earlier today and I believe your Honours’ Associates have that. This is an extract from that book. It was obtained from the Victorian Supreme Court library and, as it happened, the only copy of this book in the Supreme Court library is a book that was once in the possession of Sir Isaac Isaacs and one can see that by his signature on the title page.

GLEESON CJ: I am sure it was in his ownership as well as his possession otherwise he would not have written on it.

MS TATE: Yes, I am sure that is true, your Honour. We do not rely upon the presence of the signature as evidence that the book was either owned or possessed by him at the time that it was published but it is simply the only copy of the book we had available to us. Your Honours, within that commentary on the 1897 Act, firstly, in the preface to the first edition at page vi of the book at about point 5 the author states:

Employers will have none too much time in which to make the necessary arrangements consequent on the passing of a statute which casts upon them a liability, hitherto undreamt of, to make provision for every workman injured by accident in their employ. Insurance companies, also, will need to ascertain the statutory liabilities of the employers, who will flock to effect insurance against the demands hereafter to be made of them.

Then at page ix the author sets out the remarkable features of the Act and he states at about point 4 that:

The introduction of this novel liability was not wholly without warning.

And this was now in Britain.

In 1893 the Government of the day introduced a bill into the House of Commons to amend the law relating to the liability of employers for injuries to their workmen. That bill, which passed the House of Commons and would doubtless have become law had the House of Lords not insisted upon the insertion of a contracting-out clause, followed well-known legal principles, and based the liability of the employer upon the fact that he or his servants had been guilty of negligence, and had thereby caused the injury in respect of which compensation was claimed.

Then there is a further discussion about how far it should extend. Then on page xvi there is a mention of the German system at about point 3 of the page:

A glance at the scheme which exists in Germany for the compensation of workmen injured by accidents shows us at once whence the idea, embodied and worked out in the Act, has been borrowed.

Then at the bottom of xvii:

There is no provision for mutual insurance amongst the members of similar trades. The remedy for this is, of course, insurance with one of the numerous insurance societies, but this would appear to be a more onerous method for the individual employer than would be a system of compulsory mutual insurance.

So there is there recognition that the developments in England in relation to workers’ compensation liability were based in part on the German system or at least with the knowledge of the German system even if they did not go as far as that system. The Act itself is to be found behind tab 6 of the first folder of extrinsic materials. Really, this is the legislation which introduced a no-fault liability with respect to employers. Section 1 provided that:

If in any employment to which this Act applies (a) personal injury by accident arising out of and in the course of the employment (b) is caused to a workman (c), his employer shall, subject as herein-after mentioned, he liable to pay compensation –

and then there are various exclusions, for instance, for serious and wilful misconduct under 2(c) which is similar to still what appears within the Victorian legislation. At the time that this legislation was passed, the 1897 Act, there were debates within the House of Commons within Great Britain and a copy of extracts from those debates have also been provided to your Honours. They are the Parliamentary Debates, Authorised Edition, Fourth Series, 1897. Your Honours should have copies of those. If I could refer your Honours first to page 674, left-hand column - this is a debate in the Commons on 17 May 1897:

MR. ATHERLEY-JONES (Durham N.W.) congratulated the Home Secretary -

He then says at the top of page 674, about point 2:

He had studied the German system of compensating workmen for accidents, and he entirely differed from the hon. Member who spoke last as to the expense it imposed on the State . . . But he believed the German system had been found to act most beneficently in this respect, that it had placed no undue burden on the employer and had secured the absolute certainty of payment to the workman. An explosion in a coal mine often involved the lamentable sacrifice of 100, 200, or 300 lives. The insurance of certain fiery mines would no be effected except at prohibitive rates . . . He asked whether it would not be possible to introduce some provision of compensation in the Bill by which a guarantee might be afforded either by Government help or otherwise, that the compensation which would be applicable to these particular cases should be secured to the workman.

Then, on page 738, Mr Lionel Holland, at the bottom of the first column, says:

But it seemed rather curious that we should be unable to do in England generally what many of the employers in England had done voluntarily, and what was made compulsory upon all employers in most trades in Germany. The system of insurance in Germany was not less satisfactory to the employer than to the employed, although the burden which the system imposed on the employers was no light one.

Then, on page 1154, Mr Joseph Pease introduces an amendment and moves – this is at the left-hand column, about point 7:

That it be an Instruction to the Committee that they have power to make the State liable to pay compensation under the Bill.

At the bottom of the page, he says:

The Amendment standing in the name of the hon. Member for Bethnal Green and also that of the hon. Member for Northumberland (Tyneside) – the one proposing a scheme of insurance under State supervision, and the other a scheme for State insurance – are both out of order as being outside the scope of the Bill and involving a charge on the revenue.

Similarly, on page 1208, in the right-hand column, about point 7, it refers back:

He supported the Amendment on the ground that its tendency undoubtedly would be to make insurance universal. If all trades were included in the Bill the inevitable tendency would be for the State to form an insurance office in which every employer would be compelled to insure, and that was the only possible solution of the question.

Then the debates go on, your Honour. Within Australia, there was direct recognition within the colonial legislatures of the English 1897 Act as well as the systems of social insurance in Germany and other parts of Europe.

CALLINAN J: Solicitor, do we have in our materials anywhere the South Australian Workers’ Compensation Act of 1900 and the Western Australian one of 1901? You have given us the debates in respect of those. I must say I would like to see - - -

MS TATE: I think we have omitted to include copies of those, your Honour.

CALLINAN J: Would it be possible at some stage to provide them, please?

MS TATE: Yes, of course, your Honour. We will endeavour to do that before the morning, your Honour.

CALLINAN J: Did they make provision for compulsory insurance with a State with a colonial insurer?

MS TATE: No, your Honour. Victoria was the first to require compulsory insurance at all and that was in 1914. South Australia was actually quite a lot later. Queensland followed in 1916.

CALLINAN J: In any event, none of them made provision for what we would now understand to be even a rudimentary form of workers’ compensation?

MS TATE: Not for compulsory insurance, your Honour.

CALLINAN J: So they really only abolished the common employment rule.

MS TATE: They first of all abolished the defence of common employment and then effectively imposed no-fault liability and it had various exceptions for wilful misconduct and so on, but they were the radical changes that were occurring within Britain and then followed within the colonies.

CALLINAN J: The point of all of this is to show that these made it clear that they had an insurable interest - - -

MS TATE: Yes, they had an insurable interest and it was known what sort of insurance provision was made within Germany and Europe and there were indeed suggestions that there ought to be compulsory insurance and compulsory insurance with the State, even in those early times.

CALLINAN J: That nobody enacted. No colony had enacted legislation - - -

MS TATE: Well, there were at least two attempts that we know of, your Honour, that sought to extend the matter further. The first was a Workers’ Compensation Bill introduced into the New South Wales Colonial Parliament in 1899. It was introduced by the then Attorney-General Charles Gilbert Heydon, QC, and we have the Parliamentary Debates from that Bill. This Bill never became an Act. It was defeated at its second reading - - -

CALLINAN J: Did it attempt to set up a scheme, did it, or what did it do?

MS TATE: It made reference to the German scheme, and there was not an express obligation to insure under the 1899 Bill, your Honour, but perhaps if I could take your Honour to those debates. They are also in the bundle of materials that were handed - - -

CALLINAN J: All those debates do is reflect a consciousness on the part of some of a need for a colonial scheme or protection of workers in some way by the colony, the state representing the colony, the polity.

MS TATE: Yes, that is right, your Honour. They evidenced that there was an understanding that once employers had this extended liability that there would be a need for insurance and that it could be desirable that there be a State-based insurance system to provide the necessary cover. But we do not have the terms of this Bill itself. This is something that has come to light fairly recently, your Honour.

I will not bother taking your Honours to it, but I will just mention at 1947 where there is statements by the Honourable C.G. Heydon about the German system and then at page 2555 in the speech of the Honourable A. Brown there is a mention on the right-hand side column of a similar Bill which was introduced into the Victorian Colonial Parliament by Sir Henry Wrixon who was the then Attorney-General.

GLEESON CJ: How long do you expect to require for your submissions, Solicitor?

MS TATE: Your Honour, I probably need about another three-quarters of an hour. In terms of the historical materials, and it obviously comprises a large part of the argument that we put, the final thread of those materials consists of an analysis of the Convention Debates themselves and those Convention Debates are to be found behind tab 9 of the first folder of extrinsic materials. The debates which have been reproduced behind tab 9 are the debates that took place on 17 April 1897 in Adelaide and this was the time at which the insurance power was first introduced.

There is a discussion first of all of the banking power and there is a discussion in relation to the banking power by Mr Isaacs at about point 6 of the page, page 778, right-hand column, talking about:

where a State Bank carries on business purely in its own State, I desire to know why that should come under the operation of the Commonwealth?

DR COCKBURN: I am glad that this matter has been called attention to. It is a very serious one to those colonies which want to go ahead.

MR GLYNN: How is that?

Dr COCKBURN: Because the federal authority may take the power out of the hands of a State to carry on the business of banking . . . it would be very easy for the Federal Parliament by implication to compel any State to discontinue –

the business of banking. It says:

It might also explicitly forbid States to undertake it.

Now, those sorts of examples are the examples that are similar to the ones I gave earlier this morning, that if the Commonwealth’s 108A(7)(a) provision is valid, then indeed it could go one further step and by implication compel any State to discontinue by implication by requiring all employers to insure their liability with the Commonwealth.

Then there is a discussion of the insurance power and at this stage there is only an implied limitation. There is no express restriction:

Insurance, including State insurance extending beyond the limits of the State concerned.

Then Mr O’Connor says this involves a principle. He says:

The part the hon Member referred to is for this purpose: It was suggestion that colonies might undertake State insurance, as was done in New Zealand, and it was held that State insurance should not come under the general laws. From that view I entirely dissent; but this clause was drawn in accordance with the views of the Constitutional Committee. The hon Member will see, therefore, that the words “State insurance” simply indicate that whereas a State within its own boundaries should have control of all its insurance business, and the regulation of its insurance under any State system, so far as it deals with the people within its own boundaries, any part of its system that proposes to deal with people beyond its boundaries should come under the general laws. “State” is used to designate colony. I should support the hon Member if he moved to strike out –

the implied limitation. Mr Isaacs says:

It would include all insurance then?

That is, if the implied limitation was removed. In our submission, that would leave a wholly general power. Mr O’Connor says:

Yes; and I think it ought to. If a State chooses to go into the business of insurance – I do not say it is wise or not – I do not see why any departure should be made as to the uniformity of laws with regard to insurance . . . you might have five different systems of insurance outside the general law.

The point made by Justice Callinan this morning.

MR ISAACS: Is that not States rights?

MR O’CONNOR: No; because you start with the proposition that general insurance laws must be the same throughout the colonies.

Then Mr Wise says:

By keeping it in you give special privileges within its boundaries.

Now, “it” we take to refer to the implied limitation. He says a consequence of that to which he objects is that you would be giving special privileges to the States. Mr Symon, who was later the Attorney-General for South Australia, says:

To that I do not object. If South Australia chooses to establish a system of State insurance, I do not see why she should not within her own limits. It affects her own subjects only, and we should diminish the rights of self-government if we decided otherwise; but if South Australia opens agencies in Victoria, then the federal law should be able to say, “If South Australia chooses to enter into commercial rivalry with those companies outside her own territory, she should be subject to conditions imposed in other countries.” I think that is the extent to which this provision was intended to go.

Then Mr Symon says:

It seems to me that these words . . . ought to be –

and then eventually says “retained”, that they need to be spelt out to more clearly reflect their intention. Then Mr Higgins says at about point 5 of 780, left-hand column:

I agree thoroughly in principle with Mr Symon as to his intentions, but I would suggest that what is wanted here is an excluding phrase and not an including phrase. Insurance covers all kinds of insurance. You want an excepting phrase. “Insurance” will be the general expression, and then will follow:

Except State insurance confined to the limits of the particular State . . .

MR KINGSTON: Put it this way:

Excluding State insurance within the State limits.

Then there is a discussion about in 1869 New Zealand State insurance being established and the question of whether or not it was extending to Australia. Mr Walker on page 781, left-hand column, point 5 moves that all the words after “insurance” be deleted, so again going back to a general power. Then Mr Higgins explains:

My idea is this, that the Federal Parliament should be allowed to deal with all insurance matters with only one limitation. I would refrain from dealing with State insurance in the colony establishing it, but if that colony extends its operations to other colonies, I do not see why it should not be treated like an ordinary company.

Then Mr Higgins says he must press his amendment. Then at the bottom of page 781 he says:

I think my friend is under a misapprehension as to this. I am limiting insurance matters for the Federal Parliament to have control over. I propose to exclude certain matters from federal control. The expression then will be to the effect that the Federal Parliament is to have power to make laws for insurance, but it is not to have power to make laws as to insurance effected within the limits of the colony by that colony.

Then over the page we have the amendment striking out all words after “insurance” agreed to, so it is simply a general power. Then Mr Higgins moves:

To insert “excluding State insurance not extending beyond the limits of that State.”

The agreement is agreed to.

Then at tab 10 when the debate resumes, in Sydney this time, on 22 September 1897, and again first of all there is a discussion about banking and State banking, and at about point 4 on the right-hand side of 1074 he says:

We know that state banking is coming into favour in the Australasian colonies. It is not proposed to interfere with federal control of state banking when it goes beyond the limits of the state concerned. It seems to me to be purely a matter of state concern when the banking is limited to the state.

Then there is an amendment carried in relation to State banking. Then Mr Grant on page 1075 at about point 5 says:

State banking was one of the most important matters that the individual states could deal with. He hoped the Committee would give the states a free hand, as far as possible, in dealing with their own banks.

Then there is a question and then:

That the words “not extending beyond the limits of the states concerned” be inserted.

And it was resolved in the affirmative. Then there is the proposal that the words “Assurance and” be included, and I referred to that this morning, and that amendment is ultimately negatived on page 1076 at about point 3.

So the Convention Debates, we submit, show that the general purpose of the exception was one whereby the States within the boundaries of the State should be able to conduct their own insurance business and should be able to, as was said at page 779 by Mr O’Connor, have control of all its insurance business and the regulation of its insurance under any State system. It is our submission that the imposition of an obligation to insure with the State insurer is simply part of that regulation of State insurance which is a matter which lies for the States.

Just for the sake of completeness, might I add that Victoria introduced legislation imposing an obligation upon employers to insure their workers’ compensation liabilities in 1914, not with the State but it was a compulsory obligation to insure. The insurer with whom the obligation was to be discharged was either the State insurer or an insurer approved by Governor in Council, so they were approved insurers by the State or the State itself. Then Queensland followed in 1916, New South Wales in 1926. Tasmania introduced compulsory insurance for workers’ compensation liabilities in 1927. New Zealand, ultimately, it appears, waited until 1947, and the United Kingdom 1946.

CALLINAN J: Solicitor, could I bring you back to the Convention Debates at 781?

MS TATE: Yes, your Honour.

CALLINAN J: Mr Higgins, in the fairly long response he makes in the second column there - do you see that, it starts, “I think my friend is under a misapprehension as to this”, then he says:

The expression then will be to the effect that the Federal Parliament is to have power to make laws for insurance, but it is not to have power to make laws as to insurance effected within the limits of a colony by that colony.

That seems to be expressing it very, very broadly. Is that more broadly than the meaning that words can bear? I mean you could effect insurance within the colony just by going to a company carrying on business within the colony and it could be insurance in respect of any event anywhere in Australia or elsewhere.

MS TATE: One would think “effected” would mean issued, I suppose, your Honour, as to insurance issued within the limits of the colony by that colony.

CALLINAN J: It would not affect your argument but it is far too expansive a meaning of the exception, is it not?

MS TATE: Certainly, your Honour, there are repeated passages that said if the colony extends its operations to other colonies then insofar as it extends those operations it must accept that it falls under the general law.

CALLINAN J: All of that is true. If it may make it difficult, it may be one reason why sometimes it is difficult to rely upon the debates but that seems to be the last definitive statement about meaning before the matter was put to the vote and over the objections of some, including Mr Walker, immediately the placitum was adopted in that form.

MS TATE: Yes, your Honour.

CALLINAN J: If one is to look at the meaning given to it by the founders, it seems to be as close to a meaning accepted by a majority as you would find, as you could infer or find in the debates, which does seem to be rather broader than it should be or than the text can bear even.

MS TATE: It is broadly expressed, your Honour, and it may be that there is a need to read that together with Mr Higgins’ other statements throughout the debates. But, your Honours, what we have sought to establish so far is that at about the time of Federation the notion of “State insurance” did not have a narrow or restricted meaning and I think it is apparent upon the materials that we rely in support of that proposition. We would now say that even if we were wrong about the inferences that can be drawn from all those historical materials and even if the notion of “State insurance” had a strict and narrow meaning in 1900, we would say that one cannot infer that that meaning, that its contemporary meaning, ought to remain restricted.

The Commonwealth has put against us that unlike the other expressions within the Constitution, the expression “State insurance” ought not to be read liberally because it takes its place within a prohibition and they rely on the principle in the DOGS Case to say that prohibitions within the Constitution ought to receive a strict interpretation.

GUMMOW J: It is not just that but it is because, as the Chief Justice put to you earlier, I think, it can eat up the main grant to the Commonwealth because insurance activities are basically conducted in States, forgetting about Territories for the moment, and the wider you give the meaning “State insurance” with the power of monopoly attached to it, you can squeeze out the Commonwealth, which was not, I would have thought, the plan.

MS TATE: As his Honour Justice Kirby suggested to me this morning it might be that there could have been a federal - - -

GUMMOW J: I understand what you are saying. I understand what you say about the DOGS case and I think the authors of what was said in the DOGS Case later regretted what they had said, but this is a rather special example here with the insurance power.

MS TATE: Your Honour, though, does that just depend upon contingencies about the way in which the insurance industry has developed within Australia because had Mr Knibbs’ recommendations been accepted, as his Honour Justice Kirby suggested this morning, there might have been a federal insurance commission established at an early stage and a fully national insurance industry that would just be a contingency of history, your Honour. The fact that here most of the insurance is conducted within the States currently, if that is a fact, would again just be an accident of fate, your Honour. Perhaps one also might question whether it is the case now that insurance is really something that is largely conducted by the States given the presence of Comcare and its coverage throughout Australia and so on.

GLEESON CJ: You are talking about workers’ compensation insurance.

MS TATE: I thought Justice Gummow’s question was a more general one just about insurance at large.

GUMMOW J: Yes.

MS TATE: But, your Honours, the DOGS Case [1981] HCA 2; 146 CLR 559, as it is called - there it was held by the Court that a Commonwealth law which granted money to a State to provide financial aid to the educational activities of church schools was not a law which transgressed the prohibition under section 116 of the Constitution that the Commonwealth shall not make any law for establishing any religion.

Now, the case was decided without it being necessary to determine if the prohibition should be construed broadly or narrowly and that is demonstrated by the fact that Chief Justice Barwick at 577 held that prohibition should be construed liberally and perhaps if that is the first passage to which I could take your Honours at 577 where Chief Justice Barwick at about point 3 of the page says that - - -

GUMMOW J: He was not about to disavow a lifetime devoted to section 92.

MS TATE: No, your Honour. No, that is right. Clearly, the jurisprudence of this depends upon an understanding of all of those different positions by the Justices. But what he does state was that:

It was submitted for the Commonwealth that s 116, not being a provision granting legislative power but, on the contrary, a provision denying it, ought not to be read as largely as a facultative provision should be read. This submission was based on the view expressed by Sir Owen Dixon in Wragg v New South Wales. With the greatest respect to an opinion of Sir Owen, I am unable to accept this submission. I can find no reason why the words of the Constitution should not be given their full effect, whether they be expressed in a facultative or prohibitory provision. In particular, in this case, the emphatic universality of the language of s 116 seems to me to brook no restraint sought to be imposed by any such doctrine as the submission propounds. The control of the legislature by the Constitution is of the essence of its text.

Then Justice Gibbs at page 603 refers to the submission at about point 7 of the page and again:

It was submitted on behalf of the plaintiffs –

here not the Commonwealth –

that the words of s 116 should be given as broad and liberal a construction as possible . . . There is no reason to give such a provision a liberal interpretation. In the end it remains necessary to determine the meaning of the words of s 116 themselves.

Now, that does not seem to take the proposition in either direction. Then Justice Stephen at page 606 at about point 3 of the page when he talks about the expression specifically related to a religion, he says:

This I have no doubt is the meaning of the verb “establish” and of its present participle according to common usage when used with reference to a church or religion.

And he largely appears to rely upon the common usage of the terms. Then Justice Mason at pages 614 to 615, and this is the passage relied upon by the Solicitor-General for the Commonwealth, at the bottom of 614 says:

Although in some circumstances it is permissible to construe a grant of legislative power so as to apply it to things and events coming into existence and unforeseen at the time of the making of the Constitution, so that the operation of the relevant grant of power in the Constitution enlarges or expands, a constitutional prohibition must be applied in accordance with the meaning which it had in 1900. As a prohibition is a restriction on the exercise of power there is no reason for enlarging its scope of operation beyond the mischief to which it was directed ascertained in accordance with the meaning of the prohibition at the time when the Constitution was enacted. Consequently, the content of the prohibition against establishment of religion should not be expanded by reference to a more extensive interpretation given to similar words in the First Amendment –

Then Justice Aickin at 635 gives a short judgment in agreement. He states:

I have had the advantage of reading the reasons for judgment prepared by my brother Gibbs and those prepared by my brother Mason. I am in agreement with those reasons and there is nothing that I can usefully add.

It is our submission that one can infer from that that Justice Aickin has neither supported nor rejected the proposition put by the Commonwealth. Then Justice Wilson at pages 652 to 653 says:

The plaintiff’s plea for a broad construction overlooks the fact that we are dealing with a clause which does not grant power, but denies it. While it is true that a constitutional grant of plenary legislative power should be construed with all the generality which the words used will admit, carrying with it whatever is incidental to the subject-matter of the power, the same is not true of a provision which proscribes power –

and it is left at that until Deputy Commissioner of Taxation v State Bank of New South Wales [1992] HCA 6; 174 CLR 219 where here it was a question of interpreting the prohibition under section 114 of the Constitution and in particular, that part of the prohibition that says the Commonwealth shall not tax property belonging to a State. Here the whole Court rejected the argument that “State” within 114 should be given a restricted meaning on the basis that prohibition should be construed strictly.

At 229, in a joint judgment of seven Justices, the Court said, at the top of the page:

We turn now to the question whether the tax is imposed on property belonging to the State. The plaintiff argues in favour of a restricted meaning of “State” for the purposes of s. 114, contending that a constitutional prohibition should be construed strictly rather than broadly. In particular, the plaintiff argues that neither the denotation nor connotation of a constitutional prohibition should be permitted to change from time to time. This argument may have some strength in the context of a prohibition which is clearly directed against an identifiable mischief. But in this respect to give a strict construction to s. 114 would be more likely to frustrate than to achieve the attainment of its object, namely, the protection of the property of the Commonwealth and the States from the imposition of taxation by each other in the interests of their respective financial integrity.

That rejection of the principle in DOGS was further repeated in the SGH Case which is SGH Limited v The Commissioner of Taxation [2002] HCA 18; (2002) 210 CLR 51. Again, this concerned the prohibition under 114, namely, that the Commonwealth should not “impose any tax on property of any kind belonging to a State”. Here it was held that the building society in relation to which the tax was imposed was not the State for the purposes of 114, but there is a general discussion of the prohibition at paragraph 14 which is on page 67 of the report, where in a joint judgment of Chief Justice Gleeson and Justices Gaudron, McHugh and Hayne where they first of all set out what Justice Mason had said in the DOGS Case and then go on to say:

Subsequently, however, in Deputy Commissioner of Taxation v State Bank (NSW) (the State Bank Case) in a judgment of the whole Court, the contention that the same approach should be adopted in construing s 114 was rejected.

Then, further, within the consideration of the prohibition under 116 itself, which is the very prohibition for which Justice Mason said there ought to be a strict construction, in the case of The Church of the New Faith v The Commissioner of Pay-Roll Tax [1983] HCA 40; (1983) 154 CLR 120, this was a case which concerned an exemption from payroll tax, so it is in that sense a non-constitutional case. There is a question as to whether the exemption from payroll tax which applied where the wages were paid by a religious institution ought to be – whether the Church of Scientology, the Church of the New Faith ought to have the benefit of that exemption.

Now, although it is a non-constitutional case, at page 130 there is a recognition by Acting Chief Justice Mason and Justice Brennan at about point 5 of the page that what they would say about the interpretation of religion under the Pay-roll Tax Act may well have relevance for the construction of that term under 116. At about point 8 of the page they say:

Moreover, although this case does not arise under s. 116 of the Constitution or under any part of its fourfold guarantee of religious freedom, it is inevitable that the judgments in the Supreme Court, so long as they stand without consideration by this Court, will influence the construction placed upon s. 116 of the Constitution by other Australian courts.

Acting Chief Justice Mason and Justice Brennan then go on to consider in some detail what criterion ought to be applied for the assessment of a system of beliefs as a religion and they do that in very broad terms. I will just give your Honours the references. It is at 136 and 143 where it is noted that Scientology was only discovered in 1951 so it certainly would not have been a candidate for being a religion in 1900. Then at 148, having established what they take to be the essential core of a religion, make a finding that indeed the Church of the New Faith is a religion.

We rely on that judgment to show that even within the context of the very prohibition that had been looked at in the DOGS Case there may be terms within that prohibition which have not been given a strict or narrow construction or a construction as at 1900 by this Court.

We would say, and it is our submission, that freed of that limitation of the so-called principle in the DOGS Case, the expression “State insurance” should now be understood to include compulsory forms of insurance which are commonplace in contemporary times. We are all familiar with compulsory motor vehicle insurance and, indeed, compulsory professional indemnity insurance. In some instances there is an obligation to insure with the State and in some instances there is not. None of that is unfamiliar and it is our submission that the contemporary meaning of “State insurance” should be regarded as extending to compulsory forms of insurance with the State.

Might I also just make reference there to what Justice Dixon said in the Bank Nationalisation Case [1948] HCA 7; (1948) 76 CLR 1 at 334, when he was considering how to interpret the word “banking” in 51(xiii) and he was not considering the nexus of “with respect to”, he was considering the very word “banking” itself. At 334 his Honour said at about point 2 of the page:

For the reasons I have indicated, I am unable to accept the view that the word “banking” should have ascribed to it anything but the wide meaning and flexible application of a general expression designating, as a subject of legislative power, a matter forming part of the commercial economic and social organization of the community. I see no sufficient reason for importing into it any of the three limitations suggested, viz, (1) confining the power to laws for the governance of a continuing activity, to something that does not go beyond regulation, (2) –

and we rely upon this –

the limitation of the conception of banking to transactions entirely consensual, and (3) to transactions between subject and subject.

So we would say that there is a recognition in 1947 that the term “banking”, and similarly, we would say, “insurance”, ought not to be construed as having a limitation that it could not extend to transactions which are not consensual.

Might I then take your Honours to the question of what the test should be for characterising a law to determine if it infringes the restriction in 51(xiv), and I should not be too much longer. In this respect may I take your Honours to the decision in Bourke v State Bank of New South Wales which is a joint judgment of seven Justices and although it concerned the power under 51(xiii), as I have said before, it is not in contest that the principles which apply to the banking power in 51(xiii) apply equally to the insurance power under 51(xiv). Might I refer your Honours to page 286 where the Court begins to analyse the nature of the restriction in 51(xiii). What the Court says is that - and first of all they say, at about point 2 of the page:

the conclusion that the words “other than State banking” impose a restriction upon Commonwealth legislative power generally rather than only a limitation upon the ambit of s 51(xiii) -

that is not in contest either –

does not of itself identify the nature of that general restriction.

Then they go on to consider what its nature might be. They say:

Two broad alternatives are possible. First, it may be that the Commonwealth is positively prohibited from making laws with respect to State banking. In that event it would be necessary to determine what might be the proper test for deciding whether to characterize a law as one with respect to State banking. Alternatively, Commonwealth legislative power might simply not extend to the enactment of laws which can be characterized as laws with respect to banking (whether or not they can also be characterized as laws with respect to other subject-matters of legislative power) to the extent that those laws touch or concern State banking.

So there are two alternatives set out. The first alternative is that the restriction be construed as a prohibition and the second alternative is that the restriction be construed simply as an absence of power, that is that the Commonwealth legislative power does not extend so far as to include State banking. The Court then immediately infers at about point 5 of the page that:

The first of these alternatives involves the implication of an exclusive State legislative power. If there is such a power, then the ordinary tests of characterization are not adequate to determine whether or not a law of the Commonwealth intrudes into the forbidden territory. For example, to interpret words amounting to an exclusive grant of State power with all the generality which their terms admit would correspondingly reduce the generality of the inclusive grants of Commonwealth power.

This may be the problem that was adverted to earlier.

Further, it would not be possible to characterize a law as one with respect to an exclusive as well as an inclusive power.

This last consideration might suggest that notions of sole or dominant characterization such as are employed in relation to the mutually exclusive distribution of legislative powers in Canada would be appropriate when an Australian court is called upon to decide whether a law is or is not one with respect to State banking.

They consider that further to the top of the next page, essentially to say that if the area of State banking is regarded as an exclusive State legislative power then it would be necessary to determine for any relevant law whether or not it fell within that exclusive territory, or trespassed upon that forbidden territory, or whether it could otherwise be characterised within the concurrent powers of the Commonwealth. They say clearly it could not be both. In that case there may be a need to adopt the pith and substance approach that is applied in Canada whereby it is necessary to determine the dominant character of a law as being the character which is relevant to validity. They go on to say that the – in fact, your Honours, it is probably best over the page at 288 where, having considered the Canadian approach, they then say that:

The same problems arise if the test is thought to be, not whether a law is one with respect to State banking, but, as the appellants submit, whether it is one “aimed at” or “singling out” State banking. A test of that kind is appropriate in the context of laws alleged to discriminate impermissibly against a State: Queensland Electricity Commission. But a law may have a substantial connexion with State banking without being “aimed at” or “singling out” State banking. To adopt such a test would expose State banking to Commonwealth regulation in the same manner as banking generally, and thereby render the words “other than State banking” virtually meaningless.

They then go on, at about point 7 of the page, to consider a third test that they would need to adopt for characterisation if the restriction was construed as a prohibition and so if it was then considered that the States had an exclusive legislative power over State banking. They say:

At the other extreme, there might be a suggestion that the protection of State banking amounts to an exclusive State power preventing Commonwealth law from touching or affecting State banking in any way. While affording a measure of certainty, such an approach finds no support in the express words of the Constitution and has strong overtones of the discredited reserved powers doctrine. More importantly, it would conflict with the intended generality of other grants of legislative power contained in s. 51. The general grants of legislative power with respect to “Currency, coinage, and legal tender” (s. 51(xii)) and “Bills of exchange and promissory notes” (s. 51(xvi)) provide obvious examples.

So they consider, in our submission, three approaches that it would be necessary to adopt or three alternative approaches that could be adopted if the restriction was viewed as a prohibition.

GLEESON CJ: Whether or not insurance is State insurance depends on the identity of the insurer, does it not?

MS TATE: Yes, your Honour.

GLEESON CJ: If the Commonwealth established an authority that provided insurance cover and said employers may insure with this Commonwealth authority, then no question of State insurance arises. There is no State insurer.

MS TATE: Well, your Honour, we would say there that it would be the insurance power that the Commonwealth would rely upon and that insurance power includes within it clearly the restriction and it would be a question of whether or not that law in its legal operation and its practical operation had an effect upon the State insurer.

GLEESON CJ: But there is no State insurer, by hypothesis. It heads it off. It anticipates the existence of State insurance.

MS TATE: Well, if there was no State insurer, your Honour, then the law would not be characterised as a law in its legal or practical operation as a law with respect to State insurance. I think we would have to accept that, your Honour. It may be a question as to who got there first, in a sense, your Honour, but the Court having considered all the difficulties that would follow if the restriction was construed as a prohibition then, in our submission, reject the notion that it be a prohibition and they say at the bottom of 288:

The only satisfactory solution to this problem is to accept that there is no exclusive State power to make laws with respect to State banking. But the words of s. 51(xiii) still require that, when the Commonwealth enacts a law which can be characterized as a law with respect to banking - - -

GUMMOW J: Well, you can read it to us, Madam Solicitor, but I do not really understand it.

MS TATE: Well, the part that I was particularly wanting to rely upon, your Honour - - -

GUMMOW J: Very elusive.

MS TATE: It is extremely elusive, your Honour, but what I think can be made plain first of all is that there is a rejection that it is to be construed as a prohibition, there is a rejection that there is an exclusive State power, and we accept all of that, but they still go on to say that there is a need to consider whether the law, if it can be:

characterized as a law with respect to banking, that law does not touch or concern State banking, except to the extent that any interference with State banking is so incidental as not to affect the character of the law as one with respect to banking other than State banking.

GUMMOW J: Part of the problem may start at 285 at the paragraph about point 4:

It is therefore necessary in the first instance to determine whether the words “other than State banking” in s. 51(xiii) impose a general limitation upon Commonwealth legislative power –

The question is, what is the power?

MS TATE: What is the power?

GUMMOW J: Yes.

HAYNE J: And is it not a compound conception, the power?

MS TATE: It is a compound conception.

HAYNE J: In which the first step is to approach it as a compound conception. Whether any subsequent segmenting of the inquiry is useful may be a matter for real doubt, but most especially if you adopt what Mr Justice Dixon said about the banking power, namely that you cannot define banking beyond saying that this is a general expression designating as a subject of legislative power a matter forming part of the commercial, economic and social organisation of the community, step one, apply that to insurance. I understand you to take that step. Is that right?

MS TATE: Yes, your Honour.

HAYNE J: So “insurance” is to be understood as a subject of legislative power which identifies some matter forming part of commercial, economic and social organisation of the community and that part of the commercial, economic and social organisation which is the subject of the head of power, is insurance other than State insurance not extending beyond the limits of the State concerned?

MS TATE: Yes, your Honour. The grant of the power is in itself a compound expression that reflects – a compound expression describes the nature of the power. It has to be looked at as the power with respect to banking other than State banking or insurance other than State insurance. It cannot be, as it were, divided and simply said to be an insurance power to which something then is either, in a sense, added or subtracted. But the solution that the Court – and it is a joint judgment of seven Justices in Bourke – the solution that they come to is to say that – and this is at the top of 289 – where they say:

Put another way, the connexion with State banking must be “so insubstantial, tenuous or distant” that the law cannot be regarded as one with respect to State banking . . . Of course, these are the tests used in the familiar process of characterization.

So it is our submission that the Court in Bourke rejected the notion that the restriction was to be construed as a prohibition and said, well, how is one to test whether or not the restrictions infringed? The way in which to test it is simply to employ the familiar process of characterisation and ask whether the Commonwealth law is one with respect to State banking. If one does that, then the incidental Commonwealth law which only affects State banking in an incidental way is entirely tolerated. Had it been seen as a prohibition, then any law which affected State banking, even in an incidental way, would have infringed that prohibition. It would have passed the boundary. But that is not the correct conception, the Court in Bourke tells us.

My learned friend, the Solicitor-General for the Commonwealth, set out the rest of that passage in his submission and says that that has to be read within the context of the whole of that paragraph and we would agree with that, that of course one has to look – one uses the ordinary test of characterisation, but you employ it in the context of an embracing Commonwealth power and with an understanding that it is not a subject of exclusive State power.

GLEESON CJ: Is it the case that on your argument, if the Commonwealth enacted a law saying all barristers must take out professional indemnity insurance and they must insure with the Commonwealth insurance authority, the validity of that law would depend upon whether or not at the time there was in existence a State law obliging lawyers to take out professional indemnity insurance with a State authority?

MS TATE: Yes, I think that is a consequence, your Honour. In a sense, it is rather a sort of a converse of section 109 where the validity of a State law - - -

GLEESON CJ: That is what you meant earlier when you said it depends on who gets in first?

MS TATE: Yes, it is. Yes, your Honour. We would say - - -

GUMMOW J: That suggests something odd is going on.

MS TATE: Well, your Honour, we would say - - -

GUMMOW J: At a level of constitutional relations between elements of the federation.

MS TATE: Your Honour, the practical operation of a law and the effect that one law may have on another law is a matter which is - - -

GUMMOW J: This is not a 109 situation?

MS TATE: No, your Honour.

GUMMOW J: Is it a power situation?

MS TATE: It is a power situation, yes.

GUMMOW J: And the content of the power depends upon temporal considerations of who gets in first in the exercise of their power?

MS TATE: There may be something curious about that, your Honour, but we would say, not simply the question of the power but the question of the validity of the law, of course, for State laws the validity of those laws are often entirely dependent upon whether there is a Commonwealth law which in its terms in one way or another comes into conflict with that State law under section 109.

GUMMOW J: Exactly, but that is not about power. That assumes concurrent power.

MS TATE: Yes, your Honour.

GUMMOW J: You are pushing it into the realm of exclusive power and the line of exclusion and non-exclusion depends upon this temporal accident.

MS TATE: We would say not exclusion, your Honour, and I accept that the distinction that is being drawn within Bourke is elusive. But we would say if it was an exclusive State power, then there would be no toleration of incidental effects. In fact, the Court says that it would not be possible for the Commonwealth to make a law which affected State banking in any way. The Court uses those words “in any way”. We accept that of course the Commonwealth can make a law which has incidental effects upon State insurance. We are not saying that there is a boundary that is a forbidden territory that it cannot enter into. We accept in the normal way the ordinary processes should be applied and the ordinary test of characterisation should be applied and that is a test which accepts incidental effects. It is only if the effects are beyond those which can be considered to be incidental that the law will be characterised as a law with respect to State insurance.

HAYNE J: Take a federal Act that says all insurers shall prepare their accounts according to the following rules. Is that Act valid in its application to a State insurer not conducting business beyond the limits of the State?

MS TATE: We would say that such a law – and it may depend upon its particular terms, your Honour – if it had more than an incidental effect upon State insurance – and that may be a matter for assessment but it sounds prima facie as though it would – then that would be a law that would need to be struck down. Your Honour, we would say that the example here which is the example before your Honours - - -

HAYNE J: Just interrupting you, it would seem to follow from Bourke that it should fail, would it not, because the law in Bourke failed?

MS TATE: Yes, the law in Bourke failed, yes, indeed.

HAYNE J: Therefore, this incidental effect is becoming elusive.

MS TATE: We would say here, your Honour, that if the Court is assessing 108A(7)(a), which is essentially the task before it, we would say that that provision clearly dissolves an obligation which would otherwise exist under State law for employers to insure with a State insurer, and we would say that is not incidental, your Honour.

HAYNE J: There is a series of questions about the construction of that to which I want to come at some later point.

MS TATE: Yes, your Honour. All that it is left for me to do now, your Honours, is to apply the test which we say the Court in Bourke endorses and we would say that that is simply the test of asking whether the law in question is a law with respect to State insurance. We would say - - -

HAYNE J: That does raise the construction issues.

MS TATE: Yes, I thought it might, your Honour.

HAYNE J: Can you go to the federal Act and 108A(7)(a). What weight or operation do you give to the expression appearing at the end of paragraph (a), “in respect of such injury, loss, damage or death”? First, is it a reference back to the third line of the subsection itself, that is, such injury, loss, damage or death is the “particular injury, loss or damage suffered by, or in respect of the death of”, et cetera?

MS TATE: Yes, your Honour.

HAYNE J: Then is the expression “in respect of such injury, loss, damage or death” attaching – or how is it attaching and to what is it attaching?

no law of a State or Territory relating to workers compensation applies to a licensee in respect of such injury, loss, damage or death –

We seem to be some steps away from your root proposition which seems to be this is dissolving contracts of indemnity. How do we get there?

MS TATE: Well, your Honour, an injury may be an injury, loss, damage or death, and the very same injury may be the injury or loss in relation to which an employer is liable under the State law as the loss or injury that they would have a liability under the Commonwealth law. It may have two different characters and be the same injury, the same loss.

HAYNE J: At the least, the effect of 108A(7)(a) is, is it not, that, if you like, the Comcare prescription of benefits applies, not the Accident Comp Act?

MS TATE: Yes, your Honour.

GUMMOW J: Look at 108A(1).

HAYNE J: It has that operation at least, but what greater operation does it have when it is a law of a State or Territory relating to workers’ compensation, at least one view of which would be that it relates only to the statutory scheme; it does not apply to the common law consequences of negligent injury.

MS TATE: Well, your Honour, that depends on a particular view that you take of the law of a State relating to workers’ compensation and - - -

HAYNE J: Hence my earlier questions about the distinction in the ACA between comp and common law.

MS TATE: Yes, your Honour. As I said, we would anticipate being able to provide you in writing with a substitute paragraph for the form of relief, and I acknowledge that that may indeed involve some deeper problems. Perhaps it would be appropriate if I dealt with that further in reply, your Honour.

GUMMOW J: While you are thinking about that, how would this licensing system if Optus gets within it, the Commonwealth system, how would section 44, which is the Commonwealth statutes’ treatment of common law claims – would that then apply? Would Optus have the advantage of that?

MS TATE: I believe so, your Honour. Optus does hold a licence, your Honours.

HAYNE J: But not the advantage of the serious injury limitations of the accident compensation.

MS TATE: No, that is right, your Honour. There are advantages for employers under one scheme and other - - -

HAYNE J: The Lord giveth, the Lord taketh away.

MS TATE: Other advantages under the other scheme. But Optus does hold a licence and that fact is stated in our submissions. I think from 30 June 2005 the licence became operative. But if I could just in closing refer your Honours to the case of Kartinyeri where there is a passage from Justice Gaudron - Kartinyeri v The Commonwealth of Australia [1998] HCA 22; (1998) 195 CLR 337 where Justice Gaudron first of all on 357 referring back to Grannall v Marrickville says:

“The words ‘with respect to’ ought never be neglected in considering the extent of a legislative power conferred by s 51 or s 52. For what they require is a relevance to or connection with the subject assigned to the Commonwealth Parliament.”

Of course, a connection may be “so insubstantial, tenuous or distant . . . that [the law] ought not to be regarded as enacted with respect to the specified matter falling within the Commonwealth power”.

Her Honour then goes on to say in paragraph 19:

The only effect of the Bridge Act –

and this is in the Hindmarsh Bridge litigation –

is partially to exclude the operation of the Heritage Protection Act in relation to the Hindmarsh Bridge area. The Bridge Act, like Pt IIA of the Heritage Protection Act, limits the area to which Pt II applies. As Pt II of the Heritage Protection Act is a law with respect to the subject matter of s 51(xxvi), a law which governs the area of its operation has a direct connection with that subject matter. In the absence of any constitutional limitation on the power to repeal an earlier law, the true principle as stated by Dawson J in Kirmani v Captain Cook Cruises Pty Ltd [No 1] –

[1985] HCA 8; (1985) 159 CLR 351 at 459 that –

“A law which effects the repeal of another law is not a law with respect to repeal; its subject matter is the subject matter of the law which is repealed.”

We rely on that observation to say here that 108A(7)(a) insofar as it removes or dissolves an obligation to take up insurance with a State insurer is a law with respect to that obligation. The subject matter of the law is the obligation to insure with the State insurer. Those are the submissions for the appellant, your Honours. May it please the Court.

KIRBY J: Can I ask just before you sit down, are there any analogies in either the United States Constitution or the Canadian Constitution for the grant of a power subject to a qualification of the kind that exists in the relevant sections of section 51?

MS TATE: Not that we have uncovered that is in any way analogous, your Honour. There is no separate insurance power under the United States Constitution, but we will see if there is anything that we might be able to give your Honour assistance in relation to that, your Honour. May it please the Court.

GLEESON CJ: Yes, Mr Hanks.

MR HANKS: Your Honours, there were some short matters relating to the legislation that I wish to touch on, if I might. If I might go to the Commonwealth Act first, there is a beguiling reference in section 108 which is the section that identifies what it is that the licence issued by the Commission to an entity such as Optus may provide:

(1) A licence may provide that the licensee is authorised to accept liability to pay compensation and other amounts under this Act –

et cetera. Then we are told in section 108A(1) that if the licence does so provide then:

(c) the licensee is liable to pay compensation and other amounts under this Act –

that is under the SRC Act –

in respect of that injury, loss, damage or death; and

(d) Comcare is not liable - - -

GUMMOW J: You have to read paragraphs (c) and (d) as liable only to pay.

MR HANKS: Yes, it locates the liability directly in the licensed corporation rather than in Comcare.

GUMMOW J: It makes it exhaustive.

MR HANKS: It does, whereas the Act, as your Honours will know from earlier discussion today, creates liability in Comcare to pay compensation to an employee in respect of an injury. Section 14 is the obvious provision that does that, although there are many other detailed provisions that deal with other species of or specific types of compensation. Whereas you have that location of liability in Comcare, the effect of 108A(1)(c) and (d) is to substitute the licensed corporation for Comcare, although this appears to be contingent upon the licence containing such a provision.

As we read the Act, it is inevitable that any licence granted by the Commission must contain such a provision. It appears to be discretionary but the Act can have no operation in its application to a licensed corporation unless the licence does contain such a provision. That is because – there are two examples that I can take your Honours to: section 4(10A), which can be found on page 15 of the reprint, and we are told there that:

For the purposes of the application of this Act in relation to an employee employed by a licensed corporation . . . a reference in this Act (except in section 28 or Part III, V, VI, VII or VIII) –

and they do not include the liability provisions –

to Comcare is, unless the contrary intention appears, a reference to that corporation.

So the drafter of the SRC Act plainly assumed that once you had a licensed corporation it would step into Comcare’s shoes as the entity that would be liable to pay compensation.

A further illustration of this point can be found in the provisions that deal with what I will describe as the premium system. In the SRC Act Comcare has the power to set, and indeed it is required to set, premiums for certain participants, certain employers, employers that are described as entities or Commonwealth authorities. The power to set these premiums can be found in provisions that start on page 135 of the reprint under the heading of “Finance”. I need not take your Honours to all the detail here, but effectively there is power to set premiums for what are called entities and Commonwealth authorities and then to require the payment of those premiums. The premiums are set by reference to an estimate of the anticipated liability of that entity or Commonwealth authority in respect of injuries suffered by its employees. The premiums are paid into a special account and the account is given a description for the purposes of section 90C. It is described as “Comcare-retained funds” in section 90C and that is the source from which Comcare draws money to discharge Comcare’s liabilities.

The moneys that go into that account, according to Division 4 of Part VII, come only from entities, Commonwealth departments effectively, and Commonwealth authorities. They can never come from licensed corporations. So there is simply no mechanism for a licensed corporation to pay a premium. If it is fixed with liability, as indeed it plainly is, once it becomes a licensed corporation, the source from which it can make payments of compensation can only be its own pocket.

CALLINAN J: Or it can insure separately.

MR HANKS: Of course it can. It can do that but it is for the purposes of this Act a self-insurer. It may go outside and arrange for that or it may organise a bank guarantee but essentially it is assumed that it will make the payment from its own funds and, as I understand it, that is a consideration that is taken into account in issuing the licence, as to whether it has the capacity to do that. I wish to draw that part of the Commonwealth scheme to your Honours’ attention and one other aspect of the Victorian legislation.

KIRBY J: What do you get out of that?

MR HANKS: Your Honour, I do not get anything out of it. I just thought it was important that it be understood that the grant of the licence by the Commission under the SRC Act inevitably carries with it that the licensed corporation will be authorised to accept liability under that Act. It is not a “may”; it is inevitable because there would be no point in granting the licence otherwise.

KIRBY J: Yes, and that tends to confirm that self-insurance or licensed corporations are really a small exceptional group. We are not dealing here with what might be around the corner or down the road of the use of the corporations power to, as it were, barge into the territory you have traditionally occupied.

MR HANKS: Some might be comforted by that.

KIRBY J: We are dealing here just with an exceptional small, relatively confined group who must go through this administrative procedure and must be able in the judgment of the administrators to bear their own risk.

MR HANKS: If it were relevant, your Honour, I doubt that that comfort could be drawn because one could make the countervailing observation that in the days of mergers and accumulation of economic power, a substantial number of workers and employees now find that their employers are large corporations, and one could only assume that that trend is likely to continue. If the criterion for declaring a corporation to be an eligible corporation - - -

KIRBY J: It cuts both ways of course because if you look at insurance today, insurance is now increasingly global, not simply Australian, federal, State, but it is very much interconnected with a global market.

CALLINAN J: It always has been.

MR HANKS: It is not part of our case, I believe, that we are on a slippery slope which is becoming ever steeper and that is not the argument that we are putting. We are simply saying that the Constitution marks out an activity which is not a subject for Commonwealth legislative power, and that activity is one that is applicable here.

I wanted to make one other point about the Victorian legislation, if I might. I wanted, if I could, to take your Honours to the slim Act, or the Accident Compensation (WorkCover Insurance) Act, and to draw your Honours’ attention to section 9 which deals with the content of a WorkCover insurance policy. Your Honours have already been taken to subsections (2) and (3). Those are the subsections to which I wish to refer. The effect of those two subsections is that when the policy is issued, the WorkCover insurance policy, to an employer, the effect of the issuing of the policy is to make our client, the VWA, directly liable to the worker as well as to make the employer liable.

So the Authority stands beside the employer in terms of liability. The Authority is bound by any judgment, order, decision, award or determination in relation to compensation. Under subsection (3) that liability can be enforced by the worker against the Authority. So that one of the points we make in our written submissions is that by the operation of these provisions the Authority indemnifies not only the employer against the risk of liability, but also indemnifies the worker against the risk of injury. That is the effect – I am tempted to use the term “double indemnity” without perhaps realising it has another meaning.

KIRBY J: If the employer is wound up, is there a procedure whereby the worker can proceed directly against WorkCover?

MR HANKS: This would cover that contingency, your Honour, but the worker would not have to wait until the employer was wound up. The worker can proceed directly against the authority because the terms of the policy, by operation of these provisions in the insurance Act, give the worker that immediate right.

KIRBY J: What do you get out of these provisions?

MR HANKS: What we get out of it, your Honour, is that if it is proper to describe “insurance” as an activity that involves the relationship of indemnity between the insurer on the one hand and the insured on the other, then there are two forms of indemnity in operation here. One is the indemnity under the policy extended by the authority to the employer and the other is the indemnity extended by the operation of the statute by the authority to the worker.

Now, there were some perhaps relatively technical matters that were raised in questions of the Solicitor-General today and I think some of those were flicked to me. One of them, I believe, was your Honour the Chief Justice’s question as to whether, under this legislation, the authority is expected to pay a dividend, or required to pay a dividend to the State. The answer is no, it is not. The payments that can be made by the authority are the payments listed in section 32(4). They are payments to be made out of the fund which is maintained by the authority and there are – I hesitate to say how many – perhaps as many as 15 paragraphs in section 32(4).

KIRBY J: What do they do with excess funds, or has that not been a problem?

MR HANKS: No. What do they do with profit, perhaps your Honour might ask. The short answer to that is that they make a payment as a substitute for income tax out of the profit. That payment is made to the State revenue fund, consolidated revenue. As I am instructed, it is made pursuant to a national competition policy agreement between the Commonwealth and the several States whereby State-owned enterprises not being subject to income tax would nevertheless make a payment equivalent to their tax liability to the relevant State treasury. The authority has made one such payment. I am instructed that payment was made in December 2004.

GLEESON CJ: Under what section?

MR HANKS: It is not under this Act, your Honour, it is not under section 32 of this Act, it is not a payment that is authorised by section 32(4).

GLEESON CJ: So what is it authorised by?

MR HANKS: I do not have that answer yet, your Honour. I will give that answer to your Honour tomorrow.

GLEESON CJ: Thank you.

CALLINAN J: Provisions of that kind may have pre-dated the national competition policy. I think that State corporations by convention for a long time have made payments of that kind. I am not certain about that but I think that is right.

MR HANKS: The current justification, I am instructed, is found in that agreement, that intergovernmental agreement.

GUMMOW J: Private intergovernmental agreement.

MR HANKS: Justice Kirby asked a question about Qantas, I believe. A former Commonwealth authority and now - - -

KIRBY J: I am not sure that that was correct.

GUMMOW J: It was a corporation incorporated in Queensland, was it not?

KIRBY J: It may have been a company from 1921.

MR HANKS: The fact is that it did fall within the definition of a Commonwealth authority for the purposes of the SRC Act up to a certain point when the shares were sold. When that happened, it became subject to the Victorian legislation, the Accident Compensation Act, and it is still subject to the Accident Compensation Act. The same is true of the Commonwealth Bank; it is subject to the Accident Compensation Act. That would follow because at the time when they ceased to be Commonwealth authorities within the somewhat extended definition of that term, they did not elect to apply for a licence under the predecessor to Part VIII. Part VIII, as your Honours will have noticed, was added by Act No 144 of 2001, it replaced two earlier parts, VIIIA and VIIIB, which had dealt with non-departmental Commonwealth employers. They did not elect to seek a licence, they elect to stay or to move into the State systems.

KIRBY J: What about bodies such as the Wheat Board? I imagine they must be the same unless they have become licensed.

MR HANKS: I can only assume that, your Honour, but I need to ask the question on each occasion, but your Honour makes the inquiry of me. I have to seek instructions from my client as to whether that entity is or is not currently subject to the Act.

KIRBY J: You can see where it leads though, that the more such corporations which once were statutory bodies of the Commonwealth are now outsourced or privatised or corporatised but are still carrying on their functions in competition with federal agencies they are not entirely divorced from the federal milieu and that is, as it were, the justification of this form of legislation.

MR HANKS: In our submission, that is an interesting economic rationalisation for this legislation, your Honour, but the rationalisation cannot defeat what we say is the marking out in 51(xiv) of an area into which the Commonwealth Parliament cannot trespass.

KIRBY J: Well, it may be an interesting economic rationalisation, but we were told by the Solicitor that you yourselves did not enforce strictly the delineation which you are now urging on this Court.

MR HANKS: I think the Solicitor may not have quite put it that way, and I would not embrace that formulation. There are entities such as Telstra which hold licences currently under Part VIII of the SRC Act. Plainly if 108A(7) is valid, then they are immune from the Victorian legislation, and so far my client has been proceeding on the assumption that 108A(7) is valid, Justice Selway having so ruled. So we are not acting inconsistently. We are conforming to the law as it currently stands.

Telstra itself, as your Honour will know, has been through a number of manifestations, but it has always remained within the SRC Act in those various manifestations, and it took the opportunity when this Part VIII was introduced and replaced the predecessor parts in the SRC Act to apply for a licence and be granted a licence and, therefore, so it assumed, and if the provision is valid so we must assume, to maintain immunity from these laws of the State.

I believe the Chief Justice posed a question that may lie at the heart of the argument that we are having and as I took it down, though perhaps imperfectly, it was this: do we need to construe the reference to “State insurance” in 51(xiv) so that that exception, if we can describe it as that, does not eat up the power itself? If I might respond to that question with a series of propositions, our answer will go like this. Section 51(xiv) does preserve an aspect of its subject matter for the States. The subject matter of 51(xiv) – and, Justice Hayne, just forgive me if I put in these terms – is insurance. That is the broad subject matter. Insurance is properly characterised or described as the relationship of indemnity. The preserved aspect or the aspect that is not included in the grant of power is State insurance, and that is properly described, we would say, as the relationship of indemnity between the State as insurer and another as insured.

GUMMOW J: Whether consensual or not.

MR HANKS: Indeed, and that was going to be my next proposition, your Honour. That relationship may be established and defined by statute as well as by contract.

GUMMOW J: And that is when the problem arises.

MR HANKS: Perhaps so, but that is where the capacity for this preserved aspect of the subject matter to expand or contract, because the relationship is subject to definition by statute. My final proposition was it follows that the extent of the preserved aspect of the subject matter must depend on the State statute which defines the relationship. If the consequence is that as a State from time to time adjusts legislatively its State insurance activity, expanding or contracting it, the consequence of that is that the - - -

GUMMOW J: When you say the power expands or contracts, that is not right, is it?

MR HANKS: No, not quite, no. The power does not expand - - -

GUMMOW J: The degree to which it is exercised fluctuates, but the power remains constant.

MR HANKS: The degree to which it is capable of effective valid exercise.

GUMMOW J: Hence the problem. The power remains constant in its content.

MR HANKS: Yes, it does, but the law enacted by the Commonwealth Parliament may have - - -

GUMMOW J: But I mean, on your hypothesis the State power, which is the exclusive power, remains constant, does it not, with respect to this thing called State insurance?

MR HANKS: It is the aspect of that activity of insurance that is kept for the States, that is true. It is so close to an exclusive power without being one, but – yes, your Honour.

GLEESON CJ: This seems to be like section 109 in reverse.

MR HANKS: It might be, yes, your Honour, but it is plain, we would say, that 51(xiv) like 51(xiii) was designed to mark out an area, an area which is not plainly delimited at the time. It is only delimited by reference to mark out an area where the Commonwealth power will not extend. If that means that from to time that the States can, through the exercise of their general law making powers, they can enact laws creating State insurance and defining the extent of State insurance and that has the effect of reducing the capacity of the Commonwealth.

GLEESON CJ: Paragraph 13 is slightly more elaborate than paragraph 14. How, if at all, does the reference in paragraph 13 to the incorporation of banks bear upon the width of the concept of State banking?

GUMMOW J: You could not have, could you - - -

MR HANKS: It is a bit of an accident, perhaps, your Honour. It is hard to see that it – it is one of those curious additions to a placitum which seems to add nothing.

GUMMOW J: It may because you cannot have State laws saying this is the State bank and this is to be the only bank, in effect, because that would fly in the face of the potential incorporation of banks by the Commonwealth.

MR HANKS: Yes. That might be of some assistance to our argument, paradoxically.

GLEESON CJ: Or not.

MR HANKS: One or the other, or perhaps neither. I have just tried to mark out, if I could - - -

KIRBY J: The State law still has to answer to the description of a law with respect to insurance. It cannot be a law with respect to some other subject matter.

MR HANKS: Did your Honour say the State law?

KIRBY J: Yes, the State law which you say marks out of its own force the area of State regulation which cannot be intruded upon by the federal legislation.

MR HANKS: With respect, your Honour, no. One would not ask that question. One would ask whether the activity that is prescribed – defined by the State law is the activity of State insurance. That would be the question. Then one would say if one has an activity of State insurance then that is an activity with respect to which the Commonwealth Parliament cannot make a law.

GUMMOW J: In other words, there is a contraction in what otherwise would be a concurrent power?

MR HANKS: Yes. Now, the notion of contraction and expansion is not quite so alarming, although we had previously thought we might only associate it with the defence power and we had not thought that we might associate it with activity on the part of the State but that, in our submission, is the natural consequence of the argument that we are putting.

HAYNE J: But a necessary step in your argument is that it extends to the compulsory creation of a relationship of indemnity with a State entity and that that is a form of State insurance.

MR HANKS: Yes, it is, absolutely.

CALLINAN J: And you accept that there can be no notion of extraterritoriality?

MR HANKS: It is difficult to see how that could work, your Honour. It is very difficult to see how the State could reach out beyond its borders and to impose, compulsorily, a relationship of indemnity upon a person unconnected with the State.

CALLINAN J: What about non-compulsory indemnity – to offer that?

MR HANKS: Of course. That would be no inhibition on the State seeking - - -

CALLINAN J: But that would be subject to section 109.

MR HANKS: A State insurer seeking to negotiate a contract of insurance with a resident of another State or another Territory, there is no problem about that, we would think. Indeed, that must have been the thing that most exercised the minds of those who were drafting the Constitution. That was the thing that they thought they did not want to immunise from the Commonwealth legislative power.

CALLINAN J: That depends upon how you define State insurance too, does it not?

MR HANKS: Yes, your Honour. There is one point I wish to make before the Court rises. This is not a temporal matter. It does not depend on who gets there first. If the Commonwealth were to legislate in relation to, let us say, professional indemnity insurance in the year 2006 and a State were to legislate to establish a system of State insurance for professional indemnity insurance in 2007, then that would have the effect of pushing back the boundaries of Commonwealth power from that time. We are not
talking about anyone having the right to get there first and bags the territory.

KIRBY J: But it still has to be a law on State insurance.

MR HANKS: The activity in question has to be State insurance, that is, the relationship of indemnity where the insurer is the State. That can be created by statute.

KIRBY J: It is interesting that the following words do not say “also State insurance to the extent that it extends beyond the limits of the State”. It says, “also State insurance extending beyond the limits of the State”, and at least, if one wanted to read it narrowly, you would say in this case: here is a State insurance, let it be a State Government insurance, let it be within the first description, but it covers, as is typical of these cases, extraterritorial indemnity and, therefore, it is State insurance extending beyond the limits of the State, therefore, it falls back into federal power.

MR HANKS: We would not embrace that argument, your Honour. We do not think that is the right way to read the provision - - -

KIRBY J: I am sure you do not.

MR HANKS: - - - but it may be that it is better that we deal with that tomorrow morning.

GLEESON CJ: Is that a convenient time, Mr Hanks?

MR HANKS: If your Honour pleases.

GLEESON CJ: We will adjourn until 10.15 tomorrow.

AT 4.18 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 2 AUGUST 2006