Home Benefits Pty Ltd v Crafter [1939] HCA 12; (1939) 61 CLR 701 (11 May 1939)

HIGH COURT OF AUSTRALIA

Home Benefits Proprietary Limited Defendant, Appellant; and Crafter Complainant, Respondent.

Household Helps Proprietary Limited Defendant, Appellant; and Crafter Complainant, Respondent.

H C of A

On appeal from a Court of Summary Jurisdiction of South Australia.

11 May 1939

Latham C.J., Rich, Starke, Dixon, Evatt and McTiernan JJ.

Ligertwood K.C. (with him Kevin Ward), for the appellants.

Hannan K.C. (with him Gillespie), for the respondent.

Ligertwood K.C., in reply.

The following written judgments were delivered:—

May 11

Latham C.J.

Home Benefits Pty. Ltd. v. Crafter.—This is an appeal from a conviction of the appellant under the Trading Stamp Act 1924-1935 S.A., sec. 5a (2) (b). The offence charged was that the defendant on or about 3rd May 1938 at Hyde Park in the State of South Australia by means of a printed circular dated 1st March 1938 encouraged one Thomas Packman to dispatch in South Australia, in exchange for goods, numbers of portions of packages delivered about goods, namely, Bushell's tea, which on the said 3rd May 1938 had been, were being, and were intended to be sold and distributed in South Australia.

It was proved that Packman, a constable of police, found in a letter-box at his residence a circular headed by the name and address in Sydney of the defendant and that the same name and address were at the foot of the circular. This circular referred to photographs which were printed upon paper packages in which Bushell's tea was sold in South Australia. The circular, which was introduced by the words "Dear Madam," but which was not addressed to any specific person, invited the recipient to tell her friends who regularly used Bushell's tea that they could offer to buy from the defendant company in Sydney certain articles. The persons who wished to make such an offer were directed to send their name and postal address to the defendant, to identify the article which they wanted, and to send postage stamps of specified amount in each case. The relevant list of articles described and illustrated butter-knives, towels and many other articles which were offered at prices (in postage stamps) which were much less than the value of the goods.

The list also stated the number of photos which would be required in order to procure consideration of the offer to purchase the butter-knives &c. The circular did not require the photos to be sent to Sydney, but stated that it would be sufficient for the person who wished to buy the butter-knives &c. to satisfy the company, "by enclosing photos or otherwise, that they have used a sufficient quantity of Bushell's tea, coffee or cocoa to have the number of photos stated under the article they select." The circular then stated that "if this is done it will be an offer to buy from us in Sydney the article named at the stated price, which we may accept or refuse, and a request to us to deliver the article to the post office at Sydney for them, and for the post office to take delivery on their behalf at Sydney as their agent."

The circular added that the photos would remain the property of the sender, that, if forwarded, they would be returned, if desired, if an extra 2d. in stamps for postage were enclosed with the photos, and that, if an offer were not accepted, the postage stamps and photos would be returned to the sender.

The questions which arise are whether the evidence establishes encouragement by any person; whether it establishes encouragement of Packman; whether the defendant was a person who so encouraged; whether the encouragement, if any, was an encouragement to dispatch the photographs in exchange for the butter-knives &c.; and whether the Act is not invalid by reason of sec. 92 of the Constitution. It is by reason of this last contention that the matter comes before this court upon appeal.

The Trading Stamp Act 1924 prohibited the issue and delivery of "trading stamps," which are defined as including stamps, coupons, packages, &c., which entitle the holder thereof to receive any money or goods from a trading-stamp company. "Trading stamp company" is defined to mean any person, firm or company issuing trading stamps to traders and directly or by implication promising to redeem the stamps by delivering money or goods. The contest between the legislature and the coupon-trading system was evidently not decided in favour of the legislature by the Act of 1924, and accordingly the Act of 1935 was passed. This Act is plainly intended to meet devices which had been lawfully used for the purpose of evading the Act of 1924. The circular which was put in evidence in this case was equally plainly devised for the purpose of lawfully evading the application of the later Act.

The Act of 1935 inserts sec. 5a in the principal Act. This section creates a number of offences. Its operation depends upon sub-sec. 4, which defines the "articles or things" referred to in other sub-sections. These articles or things are any of the following or any portion of the following, namely, "any stamp, coupon, ticket, cover, wrapper, package, paper, photograph, document, means or device, which has been, is, or is intended to be, issued or delivered with, about, concerning, relating to, or in connection with any goods which have been, are being, or are intended to be, sold or distributed in South Australia" by any person. Sub-sec. 1 provides that no person shall in South Australia directly or indirectly give or deliver or promise any money, goods or advantage whatsoever in exchange for any of the articles or things mentioned. Sub-sec. 2 prohibits any person from inviting or encouraging any other person to commit a breach of sub-sec. 1 or to tender or dispatch or offer to tender or dispatch any of the articles or things mentioned in exchange as aforesaid. Sec. 5a (2) (b) is the provision under which the defendant was prosecuted. It is as follows:—"No person shall, directly or indirectly, either in writing or otherwise howsoever invite or encourage any other person to, or suggest that any other person should ... (b) tender, or dispatch, or offer to tender, or dispatch in or from South Australia any article or thing described in sub-section (4) of this section or any number or combination of any of such articles or things in exchange for any money, goods, reward, benefit, valuable consideration, or advantage whatsoever, whether the actual exchange shall be effected, or become effective, in South Australia or elsewhere." Sub-sec. 5 provides that no trader shall sell or distribute any goods, if any of the said articles or things are issued or delivered with, about, concerning, or relating to such goods. This sub-section also contains a rather remarkable provision that no trader shall sell any goods, not only if in respect of such articles or things any of the offences mentioned in other sub-sections are being committed, but also if such offences "will or may be committed." It is, perhaps fortunately, not necessary for the court to attempt to construe or to apply the latter portion of this provision.

The evidence plainly establishes encouragement to despatch photos to the defendant. The readers of the circular are told that, if they send a sufficient number of photos with postage stamps, they will be regarded as making an offer to purchase butter-knives &c. for the amount of the postage stamps. This is an encouragement to people to dispatch the photos—that is, "the articles or things" mentioned in the section—to the defendant.

It is urged that, as Packman did not send for any butter-knives &c. or even think of sending for them, he was not encouraged. But there can be encouragement which fails as well as encouragement which succeeds. It is true that the circular was not addressed to Packman, but it is quite obvious that it was intended to influence and might influence the mind of any person into whose hands it should fall.

The next question is whether the defendant can properly be held to be responsible for any encouragement constituted by the circular. In my opinion the defendant's contention upon this point is met by the provisions of sec. 5a (8). Under that sub-section any circular which appears to the court to be relevant to the charge, and to have been issued or delivered by the person whose name appears thereon, may be given in evidence without formal proof of the issue or delivery thereof or of the authentication by the person whose name it bears. The sub-section also provides that the circular shall be prima-facie evidence that any encouragement therein contained was actually made, was in force at the date of the alleged offence, and that it was made by the person whose name appears thereon as making or authenticating the document. In this case, therefore, the production of the circular (which is plainly relevant to the charge) is prima-facie evidence that the encouragement contained in it was made and that it was made by the defendant.

The next question is whether the encouragement constituted by the circular was an encouragement to do what is prohibited by sec. 5a (2) (b), namely, in this case, to dispatch the articles or things in exchange for goods, namely, butter-knives &c.

The circular has plainly been drafted in order, if possible, to escape the application of this provision. The circular, it is argued, does not contemplate or suggest any exchange of articles for goods. If the transaction contemplated by the circular is carried out, what happens is that an offer is made to the company to give postage stamps in return for goods, that is, in substance, to buy the goods for the price represented by the postage stamps. The photos or coupons, if forwarded, do not become the property of the company. The possession of them is merely required as a qualification for making an offer which the company will consider, but which it may accept or reject as it thinks proper. It is not even necessary to send any "articles" (photos) in order to procure consideration of the offer. It is sufficient to satisfy the company that the proposing offeror has the articles. Thus, it is said, there is no encouragement to exchange "articles" for goods.

This argument depends upon the proposition that the phrase "in exchange for" necessarily means that the property in the "articles" or coupons shall be transferred to the person who provides the goods. But it is not necessary to limit the words "in exchange for" in this manner. One of the transactions into which persons are invited and encouraged to enter involves the sending to the company of coupons and the delivery of goods by the company after receipt of the coupons. The invitation is: "Send the coupons and we will, if we so decide, send you goods." Such an invitation may properly be described as an encouragement to dispatch coupons in exchange for goods.

Finally, it is contended that the Act is unconstitutional because it infringes sec. 92 of the Constitution. Sec. 92 provides as follows: "On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free."

The objection which is raised on behalf of the company is that it wishes to conduct trade in butter-knives &c. with South Australia by the method described in the circular, that is, by accepting in New South Wales an offer to purchase the butter-knives, which offer is forwarded from South Australia, and by sending them to South Australia. The dispatch from South Australia of the particular form of offer contemplated is prevented by the Act. Another objection to the Act is that it limits the methods in which, for example, Bushell's tea, may be sold in South Australia, because sec. 5 prohibits the selling of any goods if coupons are sold with them. This provision applies to all sales, whether they are sales to persons in South Australia or to persons in other States, and it is contended that the legislature of South Australia has no power to restrict sales to other States in this manner.

In my opinion the answer to these objections is to be found in the fact that the Act does not prevent trade in any goods. It is possible to comply with the Act and to trade in tea and in butter-knives &c. in the ordinary way. What is prohibited is trading in goods by a particular method. If the Act is applied to the particular facts of this case, trading in butter-knives &c. as accessory to trading (in this case) in tea is prohibited, and trading in tea under a coupon system is also prohibited. But these provisions constitute a regulation of trade applying generally and applying equally to intra-State and inter-State trade. The Act does not stop trading in goods but regulates trading by excluding a certain manner or method of trading.

According to James v. The Commonwealth[1] such regulation of inter-State trade, not amounting to a mere prohibition of trade, is not excluded by sec. 92. In my opinion there are many difficulties in stating and applying the principle of the decision in James v. The Commonwealth[2]. But it is clear that, according to that decision, sec. 92, applying (as it was held to apply) equally to the Commonwealth and the State Parliaments, does not exclude inter-State trade from the sphere of legislative action. Any other view would result in legal incoherence. The judgment in James v. The Commonwealth[3] provides many examples of regulation of trade which were regarded by their Lordships of the Privy Council as not inconsistent with sec. 92. Among such examples are to be found, in Commonwealth legislation, the Post and Telegraph Act 1901-1923, Wireless Telegraphy Act 1905, Secret Commissions Act 1905, Commerce (Trade Descriptions) Act 1905-1933, Australian Industries Preservation Act 1906-1930, Sea-Carriage of Goods Act 1924, Transport Workers Act 1928-1929: See James v. The Commonwealth[4]. State legislation which is not prevented by sec. 92 includes the Sale of Goods Act, transport co-ordination statutes[5], marketing regulations[6], sanitary and health provisions[7], and apparently price-fixing laws[8].

One of these Acts is said to be justified as being legislation which "forbids irrespective of any State boundary objectionable trade practices in inter-State trade"[9]. Similarly another Act is justified because it is "aimed at preventing illegitimate methods of trading"[10]. The Acts to which reference was made — Secret Commissions Act 1905, Australian Industries Preservation Act 1906-1930—were Federal Acts. A State "has the same power as the Commonwealth to legislate for the peace, order and good government of the State with respect to inter-State trade, commerce and intercourse" subject to territorial limitations and to sec. 109 of the Constitution[11]. Thus, if the Commonwealth Parliament can forbid objectionable practices in trade, so also (subject to the conditions mentioned) can a State parliament.

If, however, the Federal and State Parliaments are at liberty simply to determine that a particular trade is objectionable and then to pass a statute to prohibit it, sec. 92 will have no practical effect. Accordingly, what has been said in James v. The Commonwealth[12] should not be construed as entitling any parliament to select any trade of which it disapproves and then to prohibit it, inter-State as well as intra-State. This conclusion can be avoided by recognizing the distinction between prohibition of a trade and the prohibition of a practice in trade. A mere prohibition of any inter-State trade cannot be supported as against sec. 92. Thus, if legislation involves a "burden hindrance or restriction based merely on the fact" that people come from another State, such legislation would be an infringement of the provision of sec. 92 that intercourse among the States should be free (James v. The Commonwealth[13]). So also, if a special burden is placed on goods in the State to which they have come "simply because they have come from" another State, the legislation would be invalid[14]. But it is consistent with James v. The Commonwealth[15] to hold that the prohibition of a particular practice in trading in articles which does not prevent trade in those articles if the prohibited practice is not adopted does not constitute an infringement of sec. 92. Such a provision may fairly be regarded as a regulation of trade and not a prohibition of it.

I appreciate the difficulties of basing decisions as to the constitutional validity of statutes upon the distinction between regulation and prohibition. Any regulation which creates offences necessarily involves some degree of prohibition. It is difficult to state the distinction logically, but the distinction has been recognized on innumerable occasions in the courts of the United Kingdom, of Australia and of the United States of America. The result in a particular case may depend upon a preliminary postulate as to the extent of the subject matter involved—upon an assumption as to the universe of discourse. A law penalizing trading in meat which has not been inspected is a regulation when it is viewed in relation to buying and selling meat, or in relation to buying and selling generally; but it is a prohibition of the sale of uninspected meat. If a case is doubtful, it may be remembered that, when the validity of a statute is in question, a court applies a counsel of prudence in abstaining from declaring a statute to be invalid where the matter is left in doubt. Whatever the difficulties may be, it appears to me, as at present advised, that James v. The Commonwealth[16] involves the proposition that the distinction between regulation and prohibition, unsatisfactory and vague as it sometimes proves to be, is relevant in considering the application of sec. 92.

In this case I do not think it necessary to examine other aspects of the decision in James v. The Commonwealth[17], for example, the extent to which problems arising under sec. 92 may properly be solved by referring a challenged statute to some particular category of legislative power other than a power to legislate with respect to trade, commerce or intercourse.

In the present case the prohibition of what I may call coupon trading is not a prohibition of trading in any goods. It is a regulation of the trade in all goods. The South-Australian Parliament evidently regards the coupon system as being parasitical upon legitimate trade. "For our purposes we must assume that, if a state of facts could exist that would justify such legislation, it actually did exist when the statute now under consideration was passed. For us the question is one of power, not of expediency. If no state of circumstances could exist to justify such a statute, then we may declare this one void, because in excess of the legislative power of the State. But if it could, we must presume it did. Of the propriety of legislative interference within the scope of legislative power, the legislature is the exclusive judge" (Munn v. Illinois[18]). If either the Commonwealth Parliament or the State Parliament can prohibit monopolies and penalize the taking of secret commissions (See James v. The Commonwealth[19]), it is, I think, impossible to deny to a State parliament the power of prohibiting the offering of discounts upon prices of goods by a method which it is reasonably open to any parliament to regard as a disturbance of legitimate trade. In my opinion the objections to the Act based upon constitutional grounds have failed.

For the reasons stated the appeal should be dismissed.

Household Helps Pty. Ltd. v. Crafter.—The determination of this appeal depends upon the same considerations as those which arise in Home Benefits Pty. Ltd. v. Crafter.

This appeal should be dismissed for the same reasons.

Rich J.

These cases were heard together, and the second one stands or falls with the decision of the first. The main question is concerned with the constitutional validity of sec. 5a of the Trading Stamp Act 1924-1935 S.A.. Other questions, which standing alone would not be the subject of an appeal to this court, are so involved in the Federal matter as to require decision (Duncan and Green Star Trading Co. Pty. Ltd. v. Vizzard[20]). The first of these questions relied upon as a defence to the offence alleged under sec. 5a (2) (b) of the South-Australian Act relates to the delivery of the circular the subject of the complaint. In my opinion the presumptive proof provided by sub-sec. 8 of sec. 5a combined with the fact that the copy of the circular was found in the complainant's letter-box is sufficient proof of delivery. It was next contended that the circular did not amount to an encouragement within the meaning of sec. 5a (2). The offence is not concerned with the subjective effects but is founded on what the particular defendant says or does. Judged by this standard I think that the circular did encourage the complainant to dispatch certain parts of tea-packages to the defendant in exchange for goods. And I am of opinion that the proposal contained in the circular when carried to completion is not a sale of goods but is concluded within the words of sec. 5a (2) (b) and the charge laid in the complaint is duly laid. On the question of the constitutional validity of the legislation, I incline to the view that the particular transaction evidenced in this case is not forbidden by sec. 92 of the Constitution.

In my opinion both appeals should be dismissed.

Starke J.

Appeals from the decision of a special magistrate sitting as a court of summary jurisdiction in Adelaide convicting the appellants of offences under the Trading Stamp Act Amendment Act 1935, 26 Geo. V. No. 2255.

The Act, by sec. 5, inserts in the Trading Stamp Act 1924-1935 a section (5a) which provides that no person shall directly or indirectly either in writing or otherwise howsoever invite or encourage any other person to, or suggest that any other person should, tender, or dispatch, or offer to tender, or dispatch in or from South Australia any article or thing described in sub-sec. 4 of the section or any number or combination of any such articles or things in exchange for any money, goods, reward, benefit, valuable consideration, or advantage whatsoever, whether the actual exchange shall be effected or become effective in South Australia or elsewhere. The articles mentioned in sub-sec. 4 are any of the following, namely, any stamp, coupon, ticket, cover, wrapper, package, paper, photograph, document, means or device, which has been, is, or is intended to be, issued or delivered with, about, concerning, relating to, or in connection with any goods which have been, are being, or are intended to be, sold or distributed in South Australia whether by the person inviting, encouraging, or suggesting as before mentioned or any other person whomsoever.

Home Benefits Pty. Ltd. was charged under this section that it by means of a circular encouraged one Packman to dispatch in South Australia, in exchange for goods, numbers of portions of packages delivered about goods, namely Bushell's tea, which had been, were being, and were intended to be sold and distributed in South Australia.

Household Helps Pty. Ltd. was charged under the same section goods, numbers of wrappers delivered about goods which had been, were being, and were intended to be sold and distributed in South Australia, namely, Velvet soap.

The facts laid before the special magistrate satisfied him that the appellants encouraged the dispatch in or from South Australia of photographs or wrappers on Bushell's tea or Velvet soap respectively in exchange for various articles. If this were done the appellants intimated that it would be regarded as an offer to buy from them in Sydney, New South Wales, the article named at the stated price mentioned in the lists of the appellants. The facts disclosed are but a variation of the coupon system of trading.

It is now contended that the South-Australian Act contravenes the provisions of sec. 92 of the Constitution. The device or means adopted by the appellants for trading among the States is restricted and hindered and, indeed, prevented in South Australia. James v. The Commonwealth[21] has now established that the freedom prescribed by sec. 92 is "freedom as at the frontier or, to use the words of sec. 112, in respect of goods passing into or out of the State"[22]. "The actual restraint or burden may operate while the goods are still in the State of origin ... or it may operate after they have arrived in the other State"[23]. "In every case it must be a question of fact whether there is an interference with this freedom of passage"[24].

It is, however, no contravention of the freedom so prescribed to legislate for the repression of destructive monopolies or illegitimate means of trading: See James v. The Commonwealth[25]. And it is no contravention, so it appears, of the freedom so prescribed to legislate for the licensing of transport within a State, although transport is an essential element of trade and commerce (R. v. Vizzard; Ex parte Hill[26]; O. Gilpin Ltd. v. Commissioner for Road Transport and Tramways (N.S.W.)[27]; Bessell v. Dayman[28]; Duncan and Green Star Trading Co. Pty. Ltd. v. Vizzard[29]; Riverina Transport Pty. Ltd. v. Victoria[30]). And, according to the decision in Hartley v. Walsh[31], it is no contravention of sec. 92 to legislate against persons selling commodities unless packed in a registered shed or unless prepared or treated in a certain way. It was said that a law directed towards procuring standards of quality, condition and grade of articles of commerce is not in contravention of sec. 92[32" name= "fn-CLR-FN32"32]; and cf. Ex parte Nelson [No. 1][33]; Tasmania v. Victoria[34]. I should have thought with my brother Dixon that the Act discussed in Hartley v. Walsh[35] was a plain contravention of the Constitution. But the critical question now is: By what method or by what test can it be ascertained whether an Act contravenes the provisions of sec. 92? In the case of Peanut Board v. Rockhampton Harbour Board[36] I said that the legislation the subject of attack must be scrutinized in its entirety and its true character and effect ascertained; all the facts and circumstances such as the nature of the Act, its operation, the character of the business involved and its actual effect on the flow of commerce must be examined: Cf. Di Santo v. Pennsylvania[37]. This, as it appears to me, is the result of the decisions in James v. Cowan[38] and James v. The Commonwealth[39] and of the recent decisions of this court in the Transport Cases[40] and in Hartley v. Walsh[41].

In my opinion it is not possible in view of these decisions to adopt the test stated in McArthur v. Queensland[42] or that stated by my brother Dixon in O. Gilpin Ltd. v. Commissioner for Road Transport and Tramways[43], which, as appears to me, is in line with, if not so extensive as, the test stated in McArthur's Case[44].

It cannot be pretended that the test propounded as the result of the decisions mentioned is very enlightening: it seems a rule of expediency rather than of law, and its application will imperil the freedom of inter-State trade and commerce. It also threatens in application a wilderness of single instances.

But it is quite plain that the South-Australian Act is aimed at preventing what is sometimes regarded as an illegitimate or undesirable method of trade. Such a law does not impede the freedom of trade prescribed by sec. 92.

Some minor points were taken in argument in support of the appeal. One was that there was no encouragement to dispatch the photographs and wrappers in exchange for goods but for the sale of goods in New South Wales. But the word "exchange" in the section is not used in any technical sense; it covers the dispatch of coupons to another in order that he will forward goods at an agreed price. Another referred to a matter of evidence; that was sufficiently answered on the argument.

The appeals should be dismissed.

Dixon J.

Home Benefits Pty. Ltd. v. Crafter.—This appeal is brought under sec. 39 (2) (b) of the Judiciary Act 1903-1937 from a court of summary jurisdiction.

The conviction of which the appellant complains is for an offence against sec. 5a (2) (b) of the South-Australian Trading Stamp Act 1924-1935. The matter is said to have become one of Federal jurisdiction because, upon the hearing of the complaint, the question arose whether sec. 92 of the Constitution provided an answer to the charge, whereupon the complaint became a matter arising under the Constitution or involving its interpretation.

The appellant is a company incorporated in New South Wales where, so far as appears, it carries on business. The case which the respondent, the complainant, seeks to make against it is that, in order to further the sale in South Australia of a particular brand of tea, coffee and cocoa, the company caused a circular to be delivered to householders in that State informing them that they might obtain from the company in Sydney any of a list of articles at prices stated in the list, prices much below their real selling value, if they sent postage stamps to cover the price and a specified number of labels to be found on, or forming part of, the outside packages in which tea, coffee and cocoa of that brand are sold by retail.

The general purpose of the Trading Stamp Act is to suppress the practice of offering or giving to buyers or consumers of vendible articles some reward or rebate in money, goods, or other advantages, upon their producing evidence that a fixed number or quantity of such articles has been bought or consumed. The provisions of sec. 5a are expressed in very wide, not to say indefinite, terms with the evident object of covering not only the many varying forms in which the practice may be manifested, but also of meeting in advance the ingenuity of traders desiring to defeat the policy, while obeying the letter, of the law, an ingenuity which seems to have proved too much for the earlier provisions contained in the Act of 1924.

In support of his case the complainant respondent relied upon one instance only of a delivery of the circular complained of. A detective of police deposed that he found a copy in his own letter-box. To establish that it had been placed there by or under the authority of the defendant appellant, the complainant depended upon the contents of the circular and presumptions which, he says, arise therefrom under an evidentiary provision, namely, sec. 5a (8). The appellant disputes the sufficiency of the presumptions arising, either from the sub-section, or from the circumstances, to fix it with responsibility, and it also denies that the circular, which is cleverly worded, contains enough to support the charge. These are all points which have no Federal element in them. The appellant, however, says that, because one ground upon which it defended itself in the court below involves Federal jurisdiction, it may rely in support of a direct appeal to this court upon any ground, whether arising under State or Federal law. In the circumstances of the present case, this view is probably correct. For in the court of summary jurisdiction the reason why the Federal question arose as one which must be decided in order to dispose of the complaint was that under State law the defendant's liability to conviction appeared to that court to be complete. The "matter," that is, the defendant's liability to a penalty, therefore necessarily involved the interpretation of sec. 92; for it necessarily involved the question whether sec. 92 applied so as to protect the defendant from conviction.

As the considerations governing the correctness under State law of the conviction form the groundwork upon which the need for invoking sec. 92 rests, they must be dealt with by this court in its turn.

The point that proof was not given of the delivery to the complainant of the copy of the circular should, in my opinion, fail. Sub-sec. 8 of sec. 5a is, it is true, limited in its relevant operation to providing presumptive evidence that the defendant whose name appears upon the document is responsible for whatever encouragement the document contains and that the encouragement was actually made, in the sense that the statement amounting to an encouragement was expressed or "published," as that word is used in the law of libel. It does not of itself provide proof that the complainant was the person "encouraged," as is alleged in the complaint. But, when the fact that the circular was found in the letter-box is added to the facts presumptively proved by means of sub-sec. 8, that conclusion may be legitimately drawn from the whole. For the circumstances then in evidence, so to speak, are that a copy of a circular containing an encouragement to possible buyers of the brand of tea, coffee and cocoa is put forth by the defendant and is found in the letter-box of a householder. Conceding the logical possibility of its having been put there by a complete stranger to the defendant, the improbability of this having happened is sufficiently high to allow of the contrary inference from the circumstances.

The offence charged in the complaint is encouraging the witness to dispatch portions of the packages containing the tea to the defendant in exchange for goods. A point taken on this form of charge is that the detective of police did not undergo or experience any encouragement of the kind alleged when he read the circular. Elation at such evidence falling into his hands he may have felt, but the circular could not but fail to arouse in him any interest in the tea or the goods. Indeed, the circular was addressed "Dear Madam." It is clear, however, that the offence consists in the act or words of the defendant, independently altogether of the effect produced upon the person to whom they are addressed.

Another point taken was that, in describing the course recommended by the circular as being to dispatch the bits of package "in exchange for goods" the complaint was badly framed. It was said that the transaction suggested by the circular would, if completed, amount to a true sale of the goods. Possibly the fact that they were sold at a low price, if the stamps sent in payment or satisfaction of the price were accompanied by portions of tea-packages, might support another form of charge under the same sub-section, namely, encouraging the dispatch of the portions of packages in exchange for an advantage, the advantage of a very low price. But that charge was not laid. To amend would be difficult, because the consent of the Attorney-General, given under sub-sec. 7, was expressed in the form of the complaint: Cf. Ellis v. Wing Lee[45]; Thomas v. McEather[46].

The point really depends on the meaning of the words "in exchange for any goods" as used in sub-sec. 2. I do not think that the various expressions accumulated in that provision are meant to be mutually exclusive. The words "in exchange for" are intended to be wide in their application, and are equivalent to "in return for." Not without a little hesitation, I conclude that a transaction by which goods were obtained in return for a number of wrappers or packages and a low money price satisfied by stamps would fall within the words of the sub-section which have been chosen by the complainant. The fact that the circular makes it clear that the portions of the package sent remain the property of the sender and will be returned, if desired, seem to me to be of no importance. "In exchange for" are words not used in any technical sense, and the production of the wrappers or other tokens as evidence of a number of purchases is the point of the transactions at which the section hits. Nor do I think it matters that the circular professes willingness on the part of the defendant to accept other evidence, or that it ascribes to the sending of the portions of package the character of an offer to buy which the defendant may or may not accept. The wide words "in exchange for" cover the mutual provision of wrappers or other tokens, on the one side, and of goods or other advantages, on the other.

I am, therefore, of opinion that under State law, considered independently of the Federal Constitution, the conviction was warranted.

But I am prepared to concur in the view that sec. 92 ought not to receive an application which would prevent the operation of sec. 5a of the State statute upon the transaction described in the circular. The matter was argued as if we ought to consider whether at any point any of the provisions contained in the section might conceivably interfere with the freedom guaranteed by sec. 92. I think that we ought to restrict ourselves to the actual transaction or course of dealing disclosed by the facts and decide whether it is entitled under sec. 92 to protection from so much of the provisions as actually strike at it. The transaction consists in a Sydney company, acting doubtless under an arrangement with the suppliers of the particular brand of tea, coffee and cocoa, offering to send to Adelaide by post, or by any means provided by the customer, goods in return for specified quantities of wrappers or packages of that brand of tea &c. and postage stamps of a specified amount, being much less than the value of the goods.

Of the inter-State character of the transaction there can be no doubt. But its most striking feature is that it forms only a secondary consequence or incident in the sale or distribution of the tea, coffee or cocoa. It is not an independent commercial dealing. It is no part of an independent trade or trafficking in goods. Its essential characteristic is that it is the raising and fulfilment of some expectation created on selling the tea, coffee, or cocoa for the purpose of increasing its competitive retail sale. It is altogether an accessory transaction to principal transactions which otherwise are left entirely free. The statute makes no difference between inter-State and intra-State transactions, and it forbids only the allowance of rebates in kind of the nature in question by or for traders and the various separate steps by which that is, or may be expected to be, done. It is thus a State regulation of an incident of retail selling. It is uniform and based upon the supposed undesirability of a commercial expedient practised in competitive trade for the purpose of increasing the sale of one man's goods at the expense of another's.

Doing the best I can with the case-law upon sec. 92 as it stands at present, I think I should hold that no forbidden interference with inter-State trade or commerce is involved in suppressing uniformly the promising or the giving of rebates in kind on the retail sale of commodities as a means of competition.

In my opinion the appeal should be dismissed.

Household Helps Pty. Ltd. v. Crafter.—The fate of this appeal is admittedly governed by the decision in Home Benefits Pty. Ltd. v. Crafter.

The appeal should, therefore, be dismissed.

Evatt J.

Home Benefits Pty. Ltd. v. Crafter.—The appellant company was convicted before a magistrate in South Australia of an offence created by sec. 5a (2) of the Trading Stamp Act 1924-1935 of the State of South Australia for having in writing (by means of a printed circular dated 1st March 1938) encouraged a person (one Thomas Packman) to dispatch in South Australia in exchange for goods portions of packages delivered about goods (Bushell's tea) which had been, were being and were intended to be sold in South Australia. An appeal has been brought to this court.

The appellant has raised questions involving not only the interpretation of sec. 5a of the Act, but also its constitutional validity. It is, therefore, of advantage to describe the general scheme of the statute.

The Trading Stamp Act as originally passed in the year 1924 was based on a general principle which has been adopted in five of the six States of Australia (Goods Act (1928) Vict., secs. 82-85; Trading Stamps Abolition Act 1900 Tas.; Trading-stamps Abolition Act 1902 W.A.; Trade Coupons Act of 1933 Q.). The main object of the South Australian Act was to prohibit, in connection with the sale of goods, the use of trading stamps, coupons or other tokens, the production of which would entitle the purchaser to receive either money or goods at a reduced price. It was also forbidden to issue or deliver in connection with goods any writing which represented that the purchaser of the goods would receive any benefit or advantage other than a discount payable in cash.

The method of suppressing what the South-Australian legislature regarded as an undesirable trade practice or system was not proof against avoidance or evasion. Although under the terms of the Act of 1924 a trading stamp included any "stamp, coupon, ticket, cover, wrapper, package, paper, document, means or device," the device was prohibited only in cases where possession of the stamps or tokens entitled the person producing them to receive actual or supposed benefit. In cases where a manufacturer marketed goods in a package or form which could be adapted to furnish the ultimate purchaser with the equivalent of a token or counter but no promise or representation was made to the purchaser that production of such a token or counter would procure him any benefit, the terms of the Act were successfully avoided. To take an example from the facts of the present case, no liability was incurred under the Act of 1924 where all that the trading-stamp company did was to represent that, if the consumer produced a large number of photograph tokens one of which was printed upon the wrapper of every packet of tea, it would consider, and might accept, an offer from such consumer to buy certain articles at a very reduced price, but would not bind itself to accept such offer. For in such a case photographs, even though faithfully collected by such a consumer during a considerable period of time, entitled him to nothing.

Yet all the evils considered by the legislature to be inherent in the trading-stamp system were inherent in schemes of the character I have illustrated. Indeed, such schemes introduced an additional element of danger because a trading company's invitation to collectors of tokens might be withdrawn at any time, and the consumer who had collected many tokens might ultimately be cheated of a reasonable expectation of getting the reward or advantage suggested but never promised.

Accordingly, in 1935, sec. 5a was inserted in the statute, and it directly attacked, not the issue or delivery of trading stamps, but the outstanding feature of the coupon or stamp system, viz., the giving of money, goods or some other advantage in exchange for or in redemption of any coupons or stamps, &c., which had previously been issued in connection with the purchase of goods by consumers (sec. 5a (1)). As a part of the legislature's direct attack upon the system, consumers were prohibited from dispatching, or offering to dispatch, coupons or tokens in exchange for any benefit (sec. 5a (3)). Traders were prevented from distributing goods with stamps or coupons on them or attached to them if such trader had reason to believe that such coupons or tokens were being used in connection with any scheme for their exchange or redemption (sec. 5a (5)). Not only did the legislature attack the system by this direct method, but, in order to prevent any publicity from being given to any coupon scheme, it penalized those who invited or encouraged persons to send or offer to send coupons &c. in exchange for any advantage (sec. 5a (2) (b)). It was under the last-named provision of sec. 5a that the present appellant was convicted.

The general purpose of the new section is thus apparent. Whereas what was prohibited previously was merely the issue of trading stamps or coupons or writings containing promises or representations as to benefits &c., the new section aimed at the suppression of the chief attraction of the coupon system, viz., the exchange transaction by which counters were handed over or produced in return for some pecuniary advantage, and the legislature thought it advisable to suppress all encouragement to the consumer to commence saving up stamps or counters with the object of exchanging or redeeming them and obtaining his reward.

I now deal in order with the objections to the conviction.

In this connection one further point of statutory construction should be referred to. Mr. Ligertwood argued that the list of tokens in sec. 5a (4) included articles which might in themselves be of considerable value so that, for instance, sec. 5a made it unlawful even to sell in the course of trade any articles which had been used as containers of commodities previously sold. Sec. 5a (5), as has already been noticed, prevents a trader from selling any of the tokens mentioned in sec. 5a (4) wherever such tokens are or may be used for the purpose of committing any of the offences penalized elsewhere in sec. 5a. It is important to observe that in no other respect is the sale of any of the tokens &c. prohibited. It seems to follow that the sale of containers is permitted provided that they are not associated with any coupon scheme. It was argued, however, that as sec. 5a (1) prohibits the giving of money or goods "in exchange for or in redemption of" the tokens specified in sec. 5a (4) all sales of containers are prohibited. I am unable to agree. If the legislature had desired to prohibit the ordinary commercial sale in the course of trade of containers not associated with coupon or stamp schemes, it would undoubtedly have expressed such prohibition in direct language and in another statute. But nothing of the kind is intended, and the general scheme of the Act shows clearly, in my view, that the legislature is endeavouring to suppress the handing over of money or goods, not as the bona-fide purchase price of the stamps, coupons, tokens, packages, &c., but as a collateral reward or advantage for having purchased the commodities in relation to which purchases the stamps, coupons, packages, tokens, &c., have been "issued or delivered" for the purpose of evidencing the fact of such purchases.

If this is right, there is nothing whatever in sec. 5a which prohibits the bona-fide sale of containers of commodities considered merely as containers. Indeed, to sell a barrel or a bottle for a purchase price would never be described as dispatching the barrel or the bottle "in exchange for" money.

The question of constitutional validity must, therefore, be considered upon the footing that the legislature of South Australia is suppressing within its borders the trading-stamp or coupon system whether in connection with local or inter-State transactions. The statute is to be regarded as regulating the marketing in South Australia of commodities whether such commodities have come to be sold in the course of inter-State trade or purely local trade. The legislature has considered it is against the best interests of trading and trade to allow the sale of commodities to be pushed and puffed by collateral schemes and devices which may induce retail purchase but on grounds quite unrelated to the price or quality of the goods. Sec. 5a in particular attempts to prevent the establishment of any token scheme by which purchasers may be induced to collect wrappers or tickets issued on or with each article purchased in the hope or expectation that they will at some distant time be exchanged for money or goods. Such a token scheme can never operate as a true system of discount or rebate even assuming that a discount or rebate is regarded as applicable between manufacturer and ultimate consumer. For it is notorious that in relation to coupon schemes many retail consumers will never collect at all, many will commence to collect but will subsequently discontinue, and some, faint but pursuing, will collect until they can satisfy the condition required for redemption even although they purchase more commodities than they really need. The element of inequality or chance is quite inconsistent with a genuine system of discount or rebate, and may itself be regarded by the legislature as a very undesirable feature of the coupon system. And, if, as usually happens, the manufacturer of the commodities does not exchange or redeem the coupons, and a third party intervenes between manufacturer and consumer to perform the function of a trading-stamp company, the additional costs thereby incurred tend to bear heavily upon manufacturer, retailer and consumer alike—or so the legislature might think. So far as the system of trading stamps is concerned, the objections to it have been stated as follows:—

1.

That the customer of a stamp-trading shop is misled by the inducements held out into believing that he is getting something for nothing, whereas in fact he may be paying very heavily for his purchase.

2.

That many trading-stamp companies offer poor value in the gifts which they themselves provide.

3.

That the retailer is frequently unable to escape from the trading-stamp system even though he may wish to do so.

4.

That trading-stamp companies are essentially parasitic, providing on useful service to the community in return for the profit which they make.

5.

That the system offers special temptations to fraud by ephemeral trading-stamp companies. (Report of Committee of Board of Trade (England) on Gift Coupons and Trading Stamps, (1933) Cmd. 4385.)

In fairness it should be added that in the report from which I have quoted such objections were not accepted as valid by a committee of the Board of Trade in England. But the legislature of South Australia is not bound to accept the reasoning which appealed to such committee or to determine that in South Australia the coupon system must inevitably operate for the best in the best of all possible worlds. Indeed, the great majority of the State legislatures of Australia have accepted the view that the system of trading stamps should be suppressed as being opposed to the best interests of trade.

It follows that it is erroneous to approach the question of constitutional validity by regarding the exchange for value of trading coupons issued with each package of (say) tea as constituting a separate and independent integer of trade. The legislature of South Australia is prohibiting the adoption of the coupon system in relation to the marketing of the tea itself and it is only in the course of regulating such marketing that it has decided to eliminate an excresence upon such marketing, viz., the exchange of coupons for value.

Sec. 92 certainly does not embody the economic or political policy of laissez-faire as distinct from the policy of inter-State free trade. As a general rule both the States and the Commonwealth may suppress trade practices and methods deemed improper, unfair or immoral. It is true that the judgment of this court in McArthur's Case[47], holding that the Commonwealth is immune from the guarantee of sec. 92, was based in part upon the theory that under a contrary holding certain Commonwealth statutes which regulated inter-State trade by suppressing improper practices in relation to such trade would have to be adjudged invalid. In James v. The Commonwealth[48], in this court, the theory was expressly rejected in the judgment of my brother McTiernan and myself[49]. We examined each of the Commonwealth statutes and pointed out that they should be deemed valid although the Commonwealth was bound by sec. 92. On appeal to the Privy Council, Lord Wright adopted a similar method of approach and decided that the statutes in question merely forbade "objectionable trade practices in inter-State trade"[50], or "illegitimate methods of trading"[51]. As Gavan Duffy C.J. had pointed out in a passage cited by McTiernan J. and myself, "no civilized nation has ever tolerated a trade or commerce, whether foreign or domestic, which was not subject to regulation and control both with respect to the method of carrying it on, and the general conduct of those who carried it on"[52].

The result of James's Case[53] is that, while the Commonwealth and the States are equally bound by sec. 92, none the less the Commonwealth in relation to inter-State trade and each of the States in relation to all its trade, including its inter-State trade, may lawfully regulate the methods of marketing and may lawfully control the conduct of traders in order to suppress unfair and improper trading. In other words, sec. 92, although it declares border freedom for the purpose of inter-State marketing, has nothing whatsoever to say in prohibition of Commonwealth or State regulations which are directed against unfair trading.

The application of these principles to the present case causes no difficulty. The marketing in South Australia of New South Wales commodities is completely unaffected by the fact that to the extent of its jurisdiction the State of South Australia has forbidden a very special and, in its opinion, a very undesirable method of promoting the sales of such commodities by coupon or token systems.

In my opinion all grounds of appeal fail, and the appeal should be dismissed.

The appeal in the case of Household Helps Pty. Ltd. v. Crafter is also governed by this decision. That appeal should also be dismissed.

McTiernan J.

Home Benefits Pty. Ltd. v. Crafter.—The more important question is whether sec. 92 of the Constitution is infringed by sec. 5a (2) of the Trading Stamp Act 1924-1935 of South Australia. The provisions of this sub-section plainly interfere with the freedom of a trader to promote his trade within the State or with other States by resorting to the practices forbidden by the sub-section. But not any practice to which a trader may wish to resort in order to maintain or increase the volume of his trade, even if that trade extends beyond the limits of a State, is shielded by sec. 92 from Commonwealth or State interference. The interference of the Commonwealth or a State with the freedom of inter-State trade is not a violation of sec. 92 unless there is opposition between the action constituting the interference and the idea of freedom to which sec. 92 compels obedience. The relevant idea of freedom to which the section commands obedience is "freedom as at the frontier." That is explained in James v. The Commonwealth[54]. The regulation by a State in that State of the trade flowing into it from, or out of it to, another State is not necessarily inconsistent with this freedom. In the present case the legislation which is impugned as a violation of sec. 92 regulates in South Australia both its internal trade and the trade flowing into it from, or out of it to, the other States by suppressing the practice of attaching to the distribution of goods collateral benefits in the form of prizes which are given to persons who collect coupons issued on the purchase of the goods or the containers or wrappers used in their distribution. Sec. 5a (2) prohibits traders from encouraging collectors of the coupons or the wrappers or containers to tender or dispatch them in exchange for money or goods. What is aimed at is the suppression of the practice of exchanging prizes for coupons or wrappers or containers where these are treated as mere counters but not as articles of commerce having any value which is taken into consideration in accepting them in exchange for the prizes, the transaction being merely the giving of a prize. It is clear that the Act does not overtly or by any device or subterfuge interfere with the free passage "as at the frontier" of the goods which a trader would seek to popularize by resorting to the practice forbidden by the legislation. It is not the trade in the goods itself but things made incident to the trade that are within the scope and operation of the Act. I agree that sec. 5a (2) does not violate sec. 92. The provisions of the legislation of which the sub-section now in question forms part are fully explained in the judgment of my brother Evatt, with which I agree.

The remaining question is whether the evidence assisted by the evidentiary sections of the Act is sufficient to support the conviction. I agree that it is sufficient.

In my opinion the appeal should be dismissed.

Household Helps Pty. Ltd. v. Crafter.—The dismissal of this appeal should follow from the dismissal of the appeal in Home Benefits Pty. Ltd. v. Crafter. The same questions of law are involved in the two cases.

Home Benefits Pty. Ltd. v. Crafter.—Appeal dismissed with costs.

Household Helps Pty. Ltd. v. Crafter.—Appeal dismissed with costs.

Solicitors for the appellant, Baker, McEwin, Ligertwood & Millhouse.

Solicitors for the respondent, A. J. Hannan K.C., Crown Solicitor for South Australia.