Opinion Number. 420



Key Legislation


The Acting Treasurer

The Acting Treasurer asks to be advised on this question whether the Commonwealth is liable to the States for interest on the value of the transferred properties which became vested in the Commonwealth under section 85 of the Constitution. That section reads [in part] as follows:

  1. All property of the State of any kind, used exclusively in connection with the department, shall become vested in the Commonwealth; but, in the case of the departments controlling customs and excise and bounties, for such time only as the Governor-General in Council may declare to be necessary:
  2. The Commonwealth may acquire any property of the State, of any kind used, but not exclusively used in connection with the department; the value thereof shall, if no agreement can be made, be ascertained in, as nearly as may be, the manner in which the value of land, or of an interest in land, taken by the State for public purposes is ascertained under the law of the State in force at the establishment of the Commonwealth:
  3. The Commonwealth shall compensate the State for the value of any property passing to the Commonwealth under this section; if no agreement can be made as to the mode of compensation, it shall be determined under laws to be made by the Parliament:
  4. The Commonwealth shall, at the date of the transfer, assume the current obligations of the State in respect of the department transferred.

In my opinion, the Commonwealth is under no legal obligation to pay interest.

Interest at common law-apart from statute-is only claimable under a contract express or implied; i.e. where there is an express promise to pay interest, or where such a promise is to be implied from the usage of trade or other circumstances.

Here there is no question of a contract; and the only question is whether section 85 of the Constitution imposes an obligation to pay interest.

The section makes no mention of interest.

The only requirement as to compensation is that the Commonwealth shall compensate the State for 'the value of any property passing' to it under this section (paragraph (iii)).

Paragraph (ii) deals with the ascertainment of that value in the particular case of property used but not exclusively used in connection with a Commonwealth department. There is no such provision in the case of the properties which vested under paragraph (i); but the difference is immaterial, because the ascertainment of value is quite distinct from the question of interest. The reference to State Acts in paragraph (ii) does not in my opinion apply any provisions there may be in State law as to the payment of interest; and I can see nothing else in the section which indicates any such liability.

It may be added that in the United States it is a 'well-settled principle, that the United States are not liable to pay interest on claims against them, in the absence of express statutory provision to that effect': United States ex rel. Angarica v. Bayard 127 U.S. at p. 260. This rule is applied to claims by a State, as well as claims by an individual: Opinions of Attorneys General of the United States, Vol. 9, p. 57 (Claim of the State of Maryland).

[Vol. 9, p. 28]