Deakin v Webb was one of a series of cases concerning whether the States could tax the income of a Commonwealth officer. The High Court of Australia overruled a decision of the Supreme Court of Victoria, holding that the States could not tax the income of a Commonwealth officer. This resulted in conflict with the Privy Council that was ultimately resolved by the passage of Commonwealth law in 1907 to permit the States to tax the income of a Commonwealth officer. The constitutional foundation of the decision was overturned by the subsequent decision of the High Court in the 1920 Engineers' Case.
Background The ability of a state to tax the income of a Commonwealth officer was one of the "constitutional loose ends" about the nature of the federal system and the legislative powers of the new Commonwealth that remained unresolved following the debates in the constitutional conventions.
The High Court and the Privy Council One of the issues debated in the drafting of the Constitution was the respective roles of the High Court and the Privy Council. The draft constitution that was put to voters in the various colonies was that there was to be no appeal to the Privy Council in any matter involving the interpretation of the Constitution or of the Constitution of a State, unless it involved the interests of some other dominion.See for example This was not acceptable to the British, who insisted on a compromise. Section 74 as ultimately enacted by the Imperial Parliament provided that if the dispute was between the Commonwealth and a state as to the extent of their respective powers under the Constitution, there could only be an appeal from the High Court to the Privy Council if the High Court granted a certificate "that the question is one which ought to be determined by Her Majesty in Council".. It was anticipated that this may give rise to conflict between the High Court and the Privy Council because the Privy Council could still hear an appeal directly from a state court. The view that was supported in the House of Lords was that the view of the Privy Council would prevail "as it was the decision of Her Majesty herself as the fountain of justice, administering justice throughout her Empire at home and abroad. p 1365-72.
One of the consequences of the concurrent appellate jurisdiction of the High Court and the Privy Council was that it was the unsuccessful litigant in the Supreme Court who had the choice of jurisdiction and the Commonwealth had no direct power to limit appeals from a State Supreme Court as the Constitutional limitation only applied to appeals from the High Court. The way in which the Commonwealth dealt with this issue in the Judiciary Act 1903, was by section 30, which gave the High Court "original jurisdiction in all matters arising under the Constitution or involving its interpretation", sections 38 and 39 then removed the jurisdiction of the State Courts on such matters, but then gave it back to them in section 39 under the guise of Federal jurisdiction in which there was no appeal to the Privy Council and instead only an appeal to the High Court.
Wollaston's case The Full Court of the Supreme Court, Madden CJ, Williams & à Beckett JJ, had held in 1902 that Dr Harry Wollaston was required to pay Victorian income tax in relation to the salary he received as the Commonwealth Comptroller-General of Customs.In re the Income Tax Acts (No 4) (Wollaston's case) (1902) 28 VLR 357. The Court considered and rejected the applicability of decisions of the Supreme Court of the United States in the interpretation of the Constitution of Australia, in particular the decision in McCulloch v. Maryland,McCulloch v. Maryland 4 Wheat. 316; Instead the Supreme Court applied the Privy Council decision in The Bank of Toronto v Lambe,. holding that the Privy Council had refused to apply the principle from McCulloch v Maryland and that it cannot govern the construction of the Australian Constitution.
D'Emden v Pedder The High Court held in D'Emden v Pedder that the salary receipts of federal government employees were not subject to state stamp duty. Wollaston's case was cited in argument,D'Emden v Pedder (1904) 1 CLR 91 at p 98-100. as that the applicability of the principle in McCulloch v Maryland, to the Constitution was negatived by the decision of the Privy Council in The Bank of Toronto v Lambe. In response Griffith CJ stated "The decision in the case of The Bank of Toronto v Lambe merely amounts to this – that under sec. 92 [of the Constitution of Canada] the Provinces have the power of direct taxation". The judgement of the Court, delivered by Griffith CJ, did not refer to Wollaston's case nor The Bank of Toronto v Lambe and instead held that "that some, if not all, of the framers of that Constitution were familiar, not only with the Constitution of the United States, but with that of the Canadian Dominion and those of the British colonies. When, therefore, under these circumstances, we find embodied, in the Constitution provisions undistinguishable in substance, though varied in form, from provisions of the Constitution of the United States which had long since been judicially interpreted by the Supreme Court of that Republic, it is not an unreasonable inference that its framers intended that like provisions should receive like interpretation."D'Emden v Pedder (1904) 1 CLR 91 at p 113. The Court subsequently described the Constitution as "framed in Australia by Australians, and for the use of the Australian people".Peterswald v Bartley (1904) 1 CLR 497 at 509. The three inaugural judges of the High Court had been leading participants in the Constitutional Conventions and all are properly seen as among the framers of the Constitution, at -. thus when the Court spoke of what was framers of the Constitution knew or intended their Honours are referring to their personal experience in that process, and not to the intention or knowledge of the Imperial Parliament in passing the Commonwealth of Australia Constitution Act 1900.
Webb v Deakin & Lyne in the Supreme Court
The question again arose in relation to the incomes of members of the Australian Parliament. In assessing the income of Alfred Deakin and Sir William Lyne, the Victorian Commissioner of Taxes had included their salaries as members of parliament, £233, and as Ministers, £1,650. Deakin lived in Victoria and was the member for Ballaarat. He was also the Attorney-General under then Prime Minister Barton. Lyne lived in New South Wales and was the member for Hume and in 1902 was the Minister for Home Affairs. At the time Parliament sat in Melbourne and so he was required to be in Melbourne whenever Parliament was sitting. required Parliament to sit in Melbourne until the establishment of the national capital, now Canberra. Deakin and Lyne objected to the assessment and the Commissioner stated cases for the opinion of the Supreme Court as to whether the assessments were correct to include Commonwealth salaries and this was again referred to the Full Court. The outcome of the case would directly affect the interests of both Barton J and O'Connor J as they were in essentially the same position as Lyne, having previously been members of parliament and living in NSW. The issue would also affect any High Court judge, as the same question would arise when the High Court was sitting in Melbourne, as it did in this case.
In essence, the question for the Supreme Court of Victoria was whether they followed their earlier decision in Wollaston's case or whether they adopted the approach of the High Court in D'Emden v Pedder. In the Supreme Court, the Commissioner was represented by Isaacs , while Deakin and Lyne were represented by Higgins .Both Isaacs and Higgins were also members of Parliament, however each maintained a practice as a barrister at the Victorian Bar, with each appearing in Wollaston's case. The Full Court, Madden CJ, à Beckett & Hodges JJ, decided to follow their earlier decision in Wollaston's case, holding that "As to the applicability of the United States cases, the opinions of the learned Judges in D'Emden v Pedder which apparently lean towards such applicability are merely dicta, and incomplete dicta at that, and we do not regard them therefore as binding upon us." The Court noted the issue as to the ultimate court of appeal, stating that the Privy Council was "at least a concurrent Court of ultimate appeal with the High Court", and the final ascertainment of the law on the matter would depend on the relation of one Court to the other..
Argument In the High Court Deakin and Lyne continued to be represented by Higgins , apparently in his capacity as the then Attorney-General,Deakin v Webb (1904) 1 CLR 585 at p 588-601. and the Commissioner continued to be represented by Isaacs . The argument recorded in the Commonwealth Law Reports does not set out any objection that the decision would directly affect the interests of the judges.The Court subsequently overruled an objection on those grounds in Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR 1087 at p 1090 holding it was a case of necessity as every Justice would have the same interest. The arguments for Deakin and Lyne were that their salaries were not earned in Victoria, but in Australia as a whole. The tax was unlawful as an interference between an officer of the Commonwealth and the Government. The Commissioner argued that income tax was a personal obligation that did not depend upon the source of the income being from the Commonwealth, the Income Tax Act 1895 was a valid Act in 1895 and did not become invalid as a result of the passage of the Constitution.
Decision of the High Court On the principles of interpretation, the Court adhered to what it had said D'Emden v Pedder, that the principles to be applied in interpreting the Australian Constitution, so far as regards the respective powers of the Commonwealth and the States were substantially the same as those laid down in McCulloch v Maryland. The Court described the judgement of the Supreme Court of Victoria as "a somewhat novel mode of dealing with a judgment of a Court of final appeal".Deakin v Webb (1904) 1 CLR 585 at p 604. Their Honours rejected the assertion that there was a preference for American decisions, or any disregard for British decisions, instead holding that the distinction was based on the deliberate adoption by the framers of the Australian Constitution of the language of the United States Constitution and a rejection of the scheme of the Canadian Constitution.
Certificate under s 74 This case was considered to be a dispute between the Commonwealth and a State as to the extent of their respective powers under the Constitution. As such there could only be an appeal to the Privy Council if the High Court granted a certificate "that the question is one which ought to be determined by Her Majesty in Council". It was argued for the Commissioner of Taxes that the question was one of importance to the states and desire of the people of the states, expressed through the state premiers, was that the Privy Council should deal with the matter. Each of the judges rejected the application, finding that the determination of constitutional questions was the responsibility of the High Court.Deakin v Webb (1904) 1 CLR 585 at p 619–31.
Webb v Outtrim in the Privy Council