• My views are desired on the following matters:

1. Whether the Commonwealth can make conditional Grants to States for the purpose of unification of their gauges analogous to the Federal Aid Roads Grants, the conditions generally being to observe the provisions set out hereunder.
2. If the States refused to accept the Grant on these terms, whether the Commonwealth can utilise its powers of defence and / or trade and commerce in sections 51 and 98 of the Constitution to regulate interstate transport by:
1. Requiring the State Instrumentalities and private owners at the cost of the Commonwealth to alter the gauges of such lines as the Governor-General-in-Council prescribes as strategic railways or as lines carrying interstate or overseas commerce within the Commonwealth;
2. Making it unlawful for any common carrier, including State Instrumentalities, to refuse to accept and carry all goods for interstate destinations;
3. Making it unlawful for any common carrier, including State Instrumentalities, to change any goods in truck lots consigned interstate from one vehicle to another between its place of reception and its place of destination, subject to any exemptions as may be prescribed;
4. Requiring State Instrumentalities in order to give greater flexibility to inter-system traffic to observe standards of equipment, rolling stock, safety appliances, the permanent way, and rating conditions for interstate and overseas transport;
5. Determining through routes on interstate systems and joint rates thereon;
6. For regulating the use of locomotives and rolling stock of one system on other systems on interstate routes;
7. Rationalising forms of interstate transport, including land, sea and air transport;
8. Setting up a Commission or Council to control, in the public interest, common carriers (including State Instrumentalities) engaged in transportation of interstate commerce, and of foreign commerce to the extent that it takes place in the Commonwealth (as, for example, the Interstate Commerce Commission, USA; see Willoughby, 2nd Edition,⁽¹⁾ pp. 799 et. seq. and 1084 et. seq. or our own Interstate Commission created by the Constitution).
1. In my opinion, question (a) should be answered ‘Yes’. Section 96 of the Constitution permits the Commonwealth to grant financial assistance to any State on such terms and conditions as Parliament thinks fit. The High Court held in 1926, in the Federal Aid Roads case (Victoria v. Commonwealth 38 C.L.R. 399) that the Commonwealth could validly provide a grant to any State entering into an agreement to construct and maintain main roads in conformity with certain conditions and standards prescribed by the Commonwealth itself. Some of the conditions suggested could only be carried out by means of alterations in the present law of the States. I think it is plain, however, that the Commonwealth can validly make it a condition of a grant that a State will carry out the necessary alterations in its law.
2. Question (b)–viz what powers the Commonwealth would have, in the absence of agreement by the States, to permit the standardisation of railway gauges and of conditions of operation–is one of much greater difficulty. American experience suggests that much can be done, in the exercise of the Commonwealth’s powers of defence and of interstate trade and commerce. It must be borne in mind, however, that railways in Australia belong largely to the States, and that the Constitution contains specific and limited Commonwealth powers in relation to State railways which have no parallel in the American Constitution. Before giving a specific answer to question (b), I should like to examine the American authorities more closely than has hitherto been done.
3. In any case, it would be advisable to approach the whole matter in the first instance entirely on the plan of agreement with the States, and without any suggestion of compulsion. The magnitude and novelty of the issues are such that, having regard especially to the specific railway provisions of our own Constitution, the greatest uncertainty must always attach to any exercise by the Commonwealth of compulsive powers in connexion with State railways. In addition, it may be doubted whether in practice such powers could be enforced in the face of opposition. On all grounds, therefore, the path of agreement should, I think, first be explored.

[Vol. 36, p. 233]

(1) Willoughby, WW 1929, The Constitutional law of the United States, 2nd edn, Baker, Voorhis, New York.