Crowe v Commonwealth [1935] HCA 63; (1935) 54 CLR 69 (17 October 1935)

HIGH COURT OF AUSTRALIA

Crowe and Others Plaintiffs; and The Commonwealth and Another Defendants.

H C of A

17 October 1935

Rich, Starke, Dixon, Evatt and McTiernan JJ.

Cleland K.C. and Ward, for the plaintiffs.

Ligertwood K.C. (with him Brebner), for the Commonwealth.

Sir John Latham K.C. (with him Mulvany), for the defendant board.

Cleland K.C., in reply.

The following written judgments were delivered:—

Oct. 17

Rich J.

The first and, to my mind, the most serious question raised by this demurrer is whether the constitution of the board offends against sec. 99 of the Commonwealth Constitution. The board is constituted by three members appointed by the Governor-General in Council and five elected members. Of these elected members, one is chosen by the growers of each of the States of New South Wales, South Australia and Western Australia, and two are chosen by the growers of the State of Victoria; none is chosen by the growers of the States of Queensland and Tasmania. The statute is passed under the trade and commerce power, and the question is whether the lack of uniformity in the basis of election works a preference by means of a law or regulation of commerce. An attempt has been made on the part of the defendants to attribute the constitution of the board to an exercise of the incidental power of legislation, to the exclusion of the commerce power. In the view I take it is unnecessary to deal with this argument, but I should not like it to be supposed that it unduly impressed me. In my opinion the basis adopted for selecting the members of the board does not amount to a preference within the meaning of sec. 99. It is neither easy nor safe to attempt a definition of preference. Commercial preference may be accomplished by means which are indirect and ingenious, and it is much easier to say whether a particular thing is or is not a preference than to define the characteristics which a preference must possess. In this case it appears to me that the constitution of the board does not give to the growers of the States who are entitled to elect members any tangible advantage of a commercial character or any legal means of securing it. The adoption of State boundaries appears to be merely a convenient method of defining the territorial limits of the electorates where interested persons exist. The fact that Victorian growers elect two members is only evidence that the framers of the Act considered that a greater number of growers of dried fruits exist in that State. It does not give to that State a commercial preference. The contention that the powers given to the Governor-General amount to a transference of legislative power forbidden by the Constitution is completely answered by Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v. Dignan[1]. The other points taken depend upon principles which are well settled and, if applicable, might support the plaintiffs' argument; but their application is, in my opinion, negatived by the very terms of the statute itself. Sec. 13 states the purpose of the power to be the control by the board of the export, sale and distribution of dried fruits. The purpose is effected by forbidding exportation except upon conditions and enforcing compliance with the conditions. The subject is plainly trade and commerce with other countries. The act or transaction fastened upon as a central point of the legislative control occurs within the jurisdiction, and it appears to me to be absurd to suggest that, because the conditions relate to things done or omitted out of the jurisdiction, it is beyond the power of Parliament to command their performance. The legislation deals with a matter of Australian concern on the basis of an exportation which it is within the power of the Commonwealth Parliament to allow or disallow conditionally or unconditionally (cf. Barcelo v. Electrolytic Zinc Co. of Australasia Ltd.[2]). The purpose of sec. 13 being to enable the board to control the export trade in dried fruits, the means consist in empowering the Governor-General to prohibit export by proclamation and the Minister to except upon terms and conditions, or conditions and restrictions, as they are variously described. Then the Governor-General has power by regulation to prescribe the terms and conditions granted by the Minister. It is evident that no discretionary control can under this scheme be exercised by the board, unless that discretionary control arises under the terms and conditions of the licences. It was, I think, the intention that the regulations prescribing terms and conditions should enable the board to exercise a close control of the whole operation of marketing. The objection that the conditions transfer to the board a power of prescribing what the exporter must do exercisable only by the Governor-General as the regulation-making authority is, in my opinion, made untenable by the very nature of the power which results from secs. 13, 14 and 29.

In my opinion the demurrer succeeds and the action should be dismissed with costs.

Starke J.

The plaintiffs export dried fruits to the United Kingdom, Canada and New Zealand. By their statement of claim in this action, they seek declarations that the Dried Fruits Export Control Act 1924-1935, and regulations purporting to have been made thereunder, are invalid, and ancillary relief. The defendants demurred, and also pleaded to this statement of claim. An order was made that the issues of law be heard and determined before the issues of fact, and they were argued before this Court and now fall for decision.

Firstly, it was argued that the Act was invalid because the Parliament of the Commonwealth had no authority to delegate its legislative power, or at least to delegate it in the form adopted in the Act. The basis of the attack was sec. 13 of the Act: "For the purpose of enabling the board"—that is the Dried Fruits Control Board constituted under the Act—"effectively to control the export and the sale and distribution after export of Australian dried fruits, the Governor-General may by proclamation prohibit the export from the Commonwealth of any dried fruits except in accordance with a licence issued by the Minister subject to such conditions and restrictions as are prescribed after recommendation to the Minister by the board." The power or authority here given to the Governor-General and to the board was contrary, so it was contended, to the provisions of the Constitution. But the validity of legislation in this form is concluded in this Court by the decisions in Roche v. Kronheimer[3], and the cases there cited, and Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v. Dignan[4].

Secondly, that the Act and regulations controlled acts of exporters and the disposition of dried fruits beyond the territorial jurisdiction of Australia, and were consequently beyond the legislative power reposed in the Parliament of the Commonwealth. The Act and regulations do undoubtedly control the disposition overseas of dried fruits exported from Australia, and do penalize acts done outside Australia. (See Act, secs. 13, 15, and regulation, No. 30 of 1935, clause 7 (2) (b), (c), (d) and (g).) The Statute of Westminster (22 Geo. V. c. 4), sec. 3, has not yet been adopted in Australia. But the power of self-governing Dominions to make laws having extra-territorial operation was considered by the Judicial Committee in Croft v. Dunphy[5]. Once it is found, as I gather from that case, that the particular topic of legislation is with respect to one of its powers enumerated in sec. 51 of the Constitution upon which the Commonwealth Parliament may competently legislate for the peace, order and good government of the Commonwealth, then no reason exists for restricting the permitted scope of such legislation by any other consideration than is applicable to the legislation of a fully sovereign State. Export, transport and sale, are all parts of that class of relation which constitutes trade and commerce. The subjects of legislation in the present case are the control of the export of Australian dried fruits, and the sale and disposition of such fruits after export. But those subjects are part of the concept of trade and commerce with other countries. The restrictions imposed by the Act and regulations are all connected with the exportation of dried fruits from Australia (Act, sec. 15; regulation, No. 30 of 1935, clause 9). The legislative authority of the Commonwealth is thus attracted, and the legislation falls within the power to make laws for the peace, order and good government of the Commonwealth with respect to trade and commerce among other countries (cf. W. & A. McArthur Ltd. v. Queensland[6]).

Thirdly, that the Act and regulations contravene the inhibition contained in sec. 99 of the Constitution: "The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof." The attack was based upon the provisions of sec. 4 of the Act:—"(1) For the purposes of this Act there shall be a Dried Fruits Control Board. (2) The board shall consist of" (among others) "(b) Two representatives elected by growers in the State of Victoria and one representative elected by growers in each of the States of New South Wales, South Australia and Western Australia." Victorian members of the board are thus twice as many as those representing each of the other named States, and the States of Tasmania and Queensland have no voice in the selection of members of the board. The argument is untenable. The preferences prohibited by sec. 99 are advantages or impediments in connection with commercial dealings based upon distinctions of locality. The selection of the members of a board gives no preference to any State or part of a State in connection with such dealings, and confers no authority upon the board to grant any such preference.

Lastly, it was contended that the regulations are not authorized by the provisions of secs. 13 and 29 of the Act. The objection to the regulations was that they promulgated no rule of conduct, but conferred almost unlimited discretion upon the Dried Fruits Control Board, in the control of the export, and the sale and distribution after export, of Australian dried fruits. The scheme of the Act is to prohibit trade and commerce in dried fruits with other countries except in so far as it may be permitted by regulations recommended by the Dried Fruits Board. The purpose is to enable the board to control such trade and commerce. But to make such control effective, discretion must necessarily be conferred upon the board both generally and in particular cases. The various regulations do not, having regard to the nature and object of the legislation, transcend the extremely wide power of making regulations contained in sec. 29 of the Act.

The result is that the demurrer to the statement of claim should be allowed.

Dixon J.

The plaintiffs complain of the restrictions imposed by the Dried Fruits Export Control (Licences) Regulations (S.R. 1935, No. 30), which came into force on 8th April 1935. To relieve themselves of the operation of those regulations, they seek to have them declared void and of no effect. They contend that they are not and could not be authorized by the provisions of the Dried Fruits Export Control Act 1924-1935 under which they profess to be made, and that, in any event, that statute is itself invalid.

The statute erects and incorporates a board called the "Dried Fruits Control Board." It is composed of eight members. Three are appointed by the Governor-General in Council. The remaining five consist of "two representatives elected by growers in the State of Victoria and one representative elected by growers in each of the States of New South Wales, South Australia and Western Australia" (sec. 4 (2) (b)).

A power to make regulations is reposed in the Governor-General in Council. It extends to prescribing all matters which by the Act are required or permitted to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act (sec. 29). Of such matters the most important appear to be the terms and conditions, or conditions and restrictions, subject to which licences to export may be granted when the free exportation of dried fruits has been prohibited by proclamation under the Act.

Sec. 13 provides that, for the purpose of enabling the board effectively to control the export and the sale and distribution after export of dried fruits, the Governor-General may by proclamation prohibit the export of any dried fruits, except in accordance with a licence issued by the Minister for the time being administering the Act, subject to such conditions and restrictions as are prescribed after recommendation to the Minister by the board. It is to be noticed that in this provision three authorities are specified. The Governor-General is designated as the authority to prohibit export conditionally and to prescribe the conditions upon which the prohibition may be relaxed. The Minister is empowered to grant licences to export subject to the prescribed conditions. The board is to recommend the conditions; otherwise the section does not define its powers. But the effective control by the board of the export and subsequent sale and distribution of dried fruits is declared by the section to be the purpose of the grant of power to the Governor-General and the Minister.

Sec. 14 proceeds explicitly to authorize the Minister to grant licences to exporters for specified periods of time, but subject to such terms and conditions as are prescribed. He is empowered to cancel the licence if the conditions are not fulfilled. And sec. 15 makes it an offence for a person who holds a licence to fail to comply with the terms and conditions upon which it was granted.

The regulations, of which the plaintiffs complain, prescribe terms and conditions for export licences, which, in effect, require the licensee to act under the direction of the board in every respect in marketing his dried fruit abroad. The price at which he sells or contracts to sell dried fruit, or exports it for sale, or authorizes its sale, must not be less than that fixed by or under the authority of the board. The licensee must ship dried fruit through and to agents who are authorized by the board, pay no commission or charges in excess of those fixed by the board, insure every shipment with such person as the board determines, and sell it on terms and conditions approved by the board to such purchasers, in such quantities, and through such agents, as the board determines. If dried fruit is shipped to the United Kingdom on consignment, its sale must be approved by the board's London agency, which may order its treatment by fumigation, recleaning, or otherwise and the licensee must store it where the board directs.

The holder of a licence for a period is not thereby enabled to export dried fruit without further authority. A condition of the licence requires him to obtain a certificate from the secretary of the board for each shipment. The certificate specifies the class and grade of the fruit and the consignee, the vessel and the port and the date of shipment. Moreover the licensee must withhold dried fruit from export if he is required to do so by notice from the secretary of the board.

The first objection made to the validity of these regulations is that they do not amount to an exercise of the Governor-General's power to prescribe the conditions and restrictions, or the terms or conditions, of a licence. It is said that they do not specify any conditions to which the licensee must conform, but simply forbid him from acting in all these various respects, except pursuant to the directions of the board given on each particular occasion.

The answer to this contention lies in the nature and object of the power given to the Governor-General. Once it is construed as a power to prescribe conditions which will enable the board to control the export and subsequent sale and distribution of dried fruit, no objection can exist to requiring licensees to conform to the board's directions. And this appears to be its true meaning. It is only by means of conditions attached to the licence to export that control can be given to the board. The conditions must reserve a discretionary authority to the board, otherwise it could exercise no control, and the discretionary authority must be to give particular directions, because that authority arises in each case under a licence obtained by an individual. Indeed no effective control of the export and of the sale and distribution abroad of such a commodity could be exercised except by a close supervision and a detailed direction of the trade. Although the conditions prescribed by the regulations give to the board a control which enables it to govern in detail every dealing with dried fruit from shipment to final sale, and to do so by means of an uncontrolled discretion directed to individual cases and transactions, yet the plan of the regulations is justified by the power under which they are made. It is not necessary to consider the validity of each and every condition separately. It is enough to say that they are not so framed as a whole as to go beyond the power arising under secs. 13, 14 and 29 of the Act.

But assuming the regulations otherwise fell within the authority conferred by these sections upon the Governor-General, it was objected on the part of the plaintiffs that the combined effect of the Act and the conditions of the licence would amount to an attempt to regulate acts, matters and things outside the territorial boundaries of the Commonwealth, which it was beyond the powers of the Parliament to affect. It is said, too, that the limits of the commerce power are exceeded because an attempt is made to control transactions occurring after the goods have ceased to be in the course of trade and commerce with other countries, after the international commerce in dried fruits has ended. It is true that sec. 13 professes the purpose of controlling the sale and distribution of dried fruit after export. But it assumes to control it by means which go to the central point of the power over trade and commerce with other countries, the exportation of commodities. The enactment operates upon that fact occurring, as it does, in Australian territory, and it closely concerns "the peace, order, and good government of the Commonwealth." It is for the Parliament to declare what exportation shall be allowed or forbidden. Its authority over exportation is complete, and what it may forbid unconditionally, it may allow conditionally. If the conditions which it imposes or authorizes are of such a nature that the law appears only ostensibly and not actually to be a law with respect to trade and commerce with other countries, it will fall outside the power. But no such question arises in the present case. The conditions actually prescribed are all relevant to trade and commerce. Although the conditions do impose requirements to be fulfilled abroad and the Act penalizes breach of the conditions, it does not follow that the legislation is beyond the power of the Parliament. It all relates to a matter of immediate interest to the Commonwealth. Considered widely, it is concerned with the marketing overseas of part of the annual production of Australian soil. Probably that alone constitutes a sufficient connection with Australia to answer the objection that the statutory provisions are bad for extra-territoriality. The provisions do not go beyond that connection. But, considered more closely, the legislation takes as the criterion of its application a transaction occurring within the Commonwealth, namely, exportation of dried fruit, and bases all the obligations it imposes upon that fact. No support can be found for the contention that the effect of the Act and the regulations combined exceeds the territorial jurisdiction of the Parliament and is not authorized by the commerce power.

The plaintiffs next relied, as a ground of invalidity, upon the legislative character of the power which the statute gives to the Governor-General. The considerations affecting this question were fully dealt with in Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v. Dignan[7]. Since that case the principles upon which the plaintiffs rely have been again reviewed and applied by the Supreme Court of the United States in the important decisions given in Panama Refining Co. v. Ryan[8] and Schechter v. United States[9]; but these decisions do not affect the position which this Court has adopted. The argument must fail upon the authority of Dignan's Case[10].

There remains an independent ground of attack upon the validity of the whole statute. Because of the composition of the board, it is said that sec. 99 of the Constitution has been infringed upon and an attempt made by a law or regulation of commerce to give preference to one State over another State. The supposed preference consists in the omission of the States of Queensland and Tasmania from the provision for the election to the board of representatives by the growers in the various States and in the presence on the board of two representatives elected by the growers in Victoria. There can be no doubt that in the election of members of the board a distinction is drawn based on State boundaries. If the distinction amounts to or involves preference within the meaning of sec. 99, the provision cannot be supported. It is true that an attempt was made on the part of the defendants to ascribe the erection of the board to some legislative power other than the trade and commerce power, and so to exclude it from the description "law or regulation of commerce." But that description appears to include every law which is made with respect to trade and commerce, and, if the establishment of the Dried Fruits Control Board is not justified under that head, it is difficult to find in sec. 51 (XXXIX.) or elsewhere any other sufficient source of power.

The question is: Does such a distinction amount to preference?

In relation to trade and commerce, as distinguished from revenue, the preference referred to by sec. 99 is evidently some tangible advantage obtainable in the course of trading or commercial operations, or, at least, some material or sensible benefit of a commercial or trading character. It may consist in a greater tendency to promote trade, in furnishing some incentive or facility, or in relieving from some burden or impediment. In the present instance nothing is given but a voice in the choice of the personnel of a board which itself is governed by the law, a law which does not and could not enable it to give preference to a State or part of a State as such. The seeming inequality of the voice given arises, no doubt, from the fact that dried fruit is grown more largely in Victoria than in the other States and that little or none is grown in Queensland and Tasmania. But, however this may be, no tangible or material advantage, direct or indirect, is given to the trade and commerce of one State over another.

For these reasons the demurrer should be allowed.

Evatt and McTiernan JJ.

This demurrer raises the question of law whether the Dried Fruits Export Control Act 1924-1935 and the Dried Fruits Export Control (Licences) Regulations made by Statutory Rules, No. 30 of 1935, are valid.

The argument for the plaintiffs requires a separate consideration of four points.

Sec. 4 (2) (b) provides that the board shall consist of two representatives elected by growers in the State of Victoria and one representative elected by growers in each of the States of New South Wales, South Australia and Western Australia. The board also consists of three other members, namely, one appointed by the Governor-General as representative of the Commonwealth Government, and two other members with commercial experience, also appointed by the Governor-General. (See sec. 4 (1), (2) (a) and (b).)

A suggested reply to this contention is that the board had been constituted by Parliament in exercise of the power referred to in sec. 51 (XXXIX.) of the Constitution, and not in exercise of the power contained in sec. 51 (I.).

In our view this contention is unsound. The subject matter of sec. 51 (XXXIX.), so far as is relevant, comprises matters which are incidental, not to the subject matters mentioned elsewhere in sec. 51, but incidental to Parliament's carrying out any of its constitutional powers. Parliament carries out its constitutional powers by proposing, debating and passing legislation. Matters incidentally arising in the course of such exercise of its powers, Parliament may also legislate upon as a special subject matter by reason of sec. 51 (XXXIX.). But legislation setting up the Dried Fruits Board to control overseas trade in Australian dried fruits does not relate to the subject matter of sec. 51 (XXXIX.) but has to be and is justified by reference to sec. 51 (I.), which gives the Commonwealth Parliament complete power over the subject matter of overseas trade and commerce (see Le Mesurier v. Connor[16]). The setting up of a business or administrative board for the purpose of controlling trade is a well-understood device of modern trade legislation and sec. 4 of the Act, in creating a board which is elsewhere impressed with the character of a trade controller, and in providing for its peculiar scheme of representation of interests, is undoubtedly a law of trade and commerce within the meaning of sec. 99 of the Constitution.

But sec. 4 (2) (b) does not give any preference to the products of any one State over any other State. The mere inequality in the number of representatives of the growers in each State is not sufficient to support the conclusion that a preference forbidden by sec. 99 of the Constitution has been given to the State whose growers have the largest representation on the board or to any State which has a larger representation than another. There is nothing to warrant the view that the allocation of representation has been made in order to effect any discrimination between the States. The reference to the States may fairly be treated as defining groups of growers in Australia according to localities for the purpose of giving the growers representation, proportionate to their numbers or production, on the board which is put in control of their products. It is also clear from the whole section relating to the constitution of the board that the representation given to any group of growers does not enable them to control the board. Sec. 4 neither puts any State in possession of trading advantages over another State nor gives it the power to obtain any such advantages. In our opinion, it is not obnoxious to sec. 99 of the Constitution.

In our opinion the demurrer should be allowed.

Demurrer allowed. Action dismissed with costs.

Solicitors for the plaintiffs, Edmunds, Jessop, Ward & Ohlstrom.

Solicitor for the defendants, W. H. Sharwood, Crown Solicitor for the Commonwealth, by Fisher, Powers, Jeffries & Brebner.