The essential point in this case⁽¹⁾, in connection with the application for special leave to appeal, is whether the proposed appeal comes within the provisions of section 74 of the Constitution. It is not open to question that if the appeal for which leave is asked is an appeal from a decision of the High Court⁽²⁾ upon a question as to the limits inter se of the constitutional powers of the Commonwealth and those of a State special leave cannot be granted.

No appeal shall be permitted

This is a unique provision. It is the first time that there has been any statutory prohibition of the exercise of the prerogative right of the King in Council to grant leave to appeal from any decision of a colonial court.

The provision that no appeal shall be permitted unless the High Court certifies that the question is one which ought to be determined by the Privy Council is not merely analogous to cases where leave of the court appealed from is required and where the object is to prevent appeals in cases of small importance. The object of this provision is to secure the finality of the highest Australian court in a class of matters of transcendent importance but of purely Australian concern. It takes away the prerogative right: see final paragraph of the section.

Decision upon a question is distinct from 'judgment in a case'. What is forbidden is not an appeal from a judgment, but an appeal from a decision on a question. The judgment in the case in which the question arose may be appealed from by special leave-on other grounds; but not on the ground that the decision of the High Court upon the constitutional question was wrong. In other words, the decision of the High Court on the constitutional question is not open to question: it is the final pronouncement of the law upon the question.

The Imperial Parliament has, in effect, said that the meaning of the Constitution-as regards the distribution of powers between the Commonwealth and States is what the High Court determines it to be, unless the High Court by certificate transfers the final decision of the question to the Privy Council.

If 'decision' were equivalent to 'judgment'-then a judgment in the course of which a question inter se was determined would be unappealable on any ground-even though the decision on the constitutional point were in favour of appellant and the judgment were against him on some other ground.

In this case it appears from the petition that the only ground of the appeal is that the decision of the High Court on the constitutional question was wrong. See paragraphs 4 to 7 of the petition.

It is immaterial what the proper answer to the constitutional question is. It is sufficient that the question arose. In this case the appellant contends, apparently, that because in his view the answer to the question is that there was no interference therefore the decision appealed from does not involve a question of interference.

Howsoever arising

These words were probably inserted to make it clear that it was immaterial whether the question arose in a case between the Commonwealth and a State-or between State and State, as the case may be-or in a suit between private parties; but they are very wide and general words, and they may assist the wide construction of the section.

As to the limits inter se of the constitutional powers

The construction of these words appears to be the main point in the case. It seems clear that if the question in this case is one of this kind the petition must be dismissed. The question decided in this case is in the abstract 'Whether under the Constitution a State can in the exercise of its legislative or executive authority interfere with the exercise of the legislative or executive authority of the Commonwealth'. See High Court judgment, Griffith C.J., pages 1-2. Stated in its application to the facts of the case the question is 'Whether a State can tax the emoluments of Federal officers'.

In either aspect, the decision of the High Court turns upon the decision of what may for shortness be called a question inter se: the question of a principle of interpretation of the provisions of the Constitution relating to the distribution of powers between Commonwealth and States, and the question of the application of that principle to the facts of the case.

It may be well here to deal with the arguments that appear to have been raised in Webb v. Outtrim⁽³⁾ in Flint v. Webb⁽⁴⁾, and in this case, against the view that a question inter se is involved. First, the argument of Sir Robert Finlay and Mr Wise in argument before the Privy Council in Webb v. Outtrim. It seems to have been contended that in order that the section may apply there must be a conflict between the exercise by State and Commonwealth of legislative powers in the exclusive field; e.g. if the question were 'Does the power to tax Commonwealth servants belong exclusively to the Commonwealth or exclusively to the States?' such a question will arise. Second, the argument of Mr Irvine in Flint v. Webb. It was contended apparently that there must be a conflict of legislative enactments as to the same subject-matter-apparently in the concurrent field.

The Constitution affords no justification for narrowing down the words of the section in any such way. The section is not confined to legislative powers-it embraces all constitutional powers, legislative, executive, or judicial; and it does not require that the opposition should be between legislative power and legislative power or between executive power and executive power or between judicial power and judicial power. The opposition may be between the legislative power of a State and the executive power of the Commonwealth and so forth.

The basis of the section is this: Here we have a Federal Constitution-a consti-tution which distributes the whole field of constitutional power, legislative, executive, and judicial, between two sets of Governments operating over the same territory: the distribution is necessarily effected by general words: it is inevitable that in the practical working of the Constitution questions as to the limits of the powers of the States as against the Commonwealth and vice versa should frequently arise-and the experience of other federations shows that it must be so. This section has relation to the federal nature of the Constitution. The cases dealt with are cases of the distribution of powers between the two-the internal limits of the State powers and the Commonwealth powers between themselves. The whole power of self-government being distributed be-tween the two sets of governing bodies, it follows that every extension of the consti-tutional powers of the States along these internal limits involves a corresponding con-traction, actual or potential, of the constitutional powers of the Commonwealth or vice versa. The only limitation effected by the words 'limits inter se' is that the section does not apply to what may be called the external limits of Commonwealth power; for in-stance, questions of exterritorial jurisdiction in which there may be questions as to the extent of the power of the Commonwealth which do not involve in any way questions as to the powers of the States. For instance, questions as to the scope of the power confer-red by section 51, sub-section (x) as to fisheries in Australian waters beyond territorial limits; or in section 51, sub-section (xxix) as to external affairs; or in covering clause 5 of the Constitution Act as to the exterritorial operation of Commonwealth laws upon British ships.

But as regards the internal limits, the section is expressed in the widest terms which it is possible to conceive. We have the constitutional powers of the Commonwealth on one hand, the constitutional powers of the States on the other, and the limit or line of demarcation between them. Every question as to that line of demarcation, or in other words as to the distribution of power between Commonwealth and State is a question inter se within the meaning of section 74.

For instance, the extension of the legislative power of the States to tax the salaries of Commonwealth officers involves a diminution of the powers of the Commonwealth, executive or legislative, with regard to their officers: as for instance, in this case, the power of the Commonwealth to make a contract of remuneration with an officer free of State income tax. It is a question as to the limits of the constitutional powers of the State with regard to the operations of the Commonwealth under its constitutional powers.

It may be argued contra that the power of the Commonwealth is not affected-only the power of the person who receives the salary to retain it. But an income tax is a tax not on property, possession or enjoyment but on acquisition; the officer is not taxed on what he has as a private citizen but on what he receives as an officer by way of official salary. The State claims a percentage of what the Commonwealth gives to the officer qua officer. In effect it is a tax upon the contract: it is a diminution of his emolument. It also in effect enables the State to obtain revenue belonging to the Commonwealth, be-cause it requires the Commonwealth in order to give an officer an effective salary of a certain amount to pay a higher amount. Alternatively, assuming that the Common-wealth does not pay a higher salary, it diminishes the effectiveness of the emolument granted by the Commonwealth by enabling the State in effect to transfer a portion of that emolument to its Treasury.

Miller, Lectures on the Constitution of the United States, p. 247-8:

There is also another matter concerning this power of taxation that deserves attention. It will be noted that the Constitution of the United States has placed several limitations upon the general power, and that some of them are implied. One of its provisions is that neither the President of the United States (Art. II, sec. 1, para. 6) nor a judge of the Su-preme or inferior Courts (Art. Ill, sec. 1) shall have his salary diminished during the period for which he shall have been elected or during his continuance in office. It is very clear that when Congress during the late war levied an income tax and placed it as well upon the salaries of the President and the Judges of the Courts as those of other people that it was a diminution of them to just that extent.

The judges were patriotic however and did not raise the question although Chief Jus-tice Taney filed with the Clerk of the Supreme Court an opinion stating that it was uncon-stitutional and ought not to be paid. Yet everybody did pay their taxes, and possibly they could not have helped themselves if they had tried because the accounting officers would have deducted the amount of the tax from the salary before paying it. Even after the war this tax of five per cent upon these salaries was deducted and paid, but about that period Mr Boydwell who was then Secretary of the Treasury of his own accord took up the ques-tion, investigated it, and came to the conclusion that this tax was void so far as these officers were concerned. He therefore returned the money to the President and to each of the judges which had been paid under that statute, and this they naturally thought was a very fair judicial construction of the constitutional provisions relating to that subject.

The income tax fetters or controls the free exercise of the legislative or executive power of the Commonwealth.

In short, the decision from which it is sought to appeal is a decision that the attempted exercise by a State of legislative power is invalid because it interferes with the exercise by the Commonwealth of legislative or executive power. That is in terms a decision of a question as to the limits inter se of constitutional powers.

The section does not require that there must have been two powers actually exer-cised and actually coming into conflict; that the Commonwealth must have exer-cised-by legislation or otherwise-some power and the State have exercised some power, and the two have come into collision. All it requires is that a question shall have arisen, in any way, as to the limits inter se of their respective powers: some question as to where the dividing line between State and Commonwealth powers is to be drawn. The decision in this case, it is submitted, depends wholly upon a question of that kind.

[Vol. 6, p. 136]

(1) Commissionens of Taxation, N.S. W. v. Baxter 5 C.L.R. 398 (application to Privy Council for special leave to appeal).

(2) Baxter v. Commissioners of Taxation, N.S.W. 4 C.L.R. 1087. An application to the High Court for special leave was dismissed for the reasons given in Flint v. Webb 4 C.L.R. l 178.

(3) 4 C.L.R. ass.

(4) 4C.L.R. 1178.