John Cooke & Company Pty Ltd v The Commonwealth

[1924] UKPCHCA 2

34 CLR 269

[PRIVY COUNCIL.]

JOHN COOKE AND COMPANY PRO-

PRIETARY LIMITED AND OTHERS

THE COMMONWEALTH OF AUSTRALIA

RESPONDENTS.

AND OTHERS

ON APPEAL FROM THE HIGH COURT. Contract-Evidence-Acquisition of Australian wool clips by Imperial Government-

Arrangement between Imperial Government and Commonwealth Government Rights of suppliers of wool against Commonwealth and Central Wool Committee- War Precautions Act 1914-1916 (No. 10 of 1914-No. 3 of 1916), sec. -Wai Precautions (Wool) Regulations 1916 (Statutory Rules 1916, No. 322), regs. 10. 13, 24, 26-War Precautions (Sheepskins) Regulations 1916 (Statutory Rules 1916, No. 321), reg. 18.

About November 1916 the Imperial Government entered into an arrangement with the Commonwealth Government to purchase the Australian wool clip through the Commonwealth Government, at an all-round price of 153d. per 1b. on the greasy wool basis, with an additional sum for handling charges, and to pay to the Commonwealth Government one-half of any profits derived from the sale of wool for other than military purposes, and it was left to the Commonwealth Government to make its own terms with the wool-owners as to the distribution among them of the price paid for the wool and any share of profits. For the purpose of carrying out this arrangement and pursuant to the War Precautions Act 1914-1916, the War Precautions (W ool) Regulations 1916 and the War Precautions (Sheepskins) Regulations 1916 were then made. The owners of shorn wool and of skin wool submitted their wool for appraisement and sale under those regulations, and the Imperial Government paid the * PresentViscount Cave, Lord Buckmaster, Lord Atkinson, Lord Wrenbury and Lord Darling,

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Commonwealth Government for all wool SO appraised and supplied to it through the Central Wool Committee set up under those regulations. The Central Wool Committee undertook the duty of distributing among the sup- pliers of wool the purchase-money and the above-mentioned share of profits as well as other profits which accrued in carrying out the transaction. The same arrangements were made and carried out for the wool clips of the three following seasons. In respect of the seasons 1916-1917 and 1917-1918 the owners of skin wool participated with the owners of shorn wool in the distribution of the above-mentioned share of profits and the other profits which accrued, but in respect of the seasons 1918-1919 and 1919-1920 the Central Wool Com- mittee refused to allow the owners of skin wool to participate in such

Held, on the evidence, 1 that, as to such share of profits and other profits which accrued, there was no contract of any kind by the Imperial Government with the wool-owners nor was there as between the wool-owners and the Commonwealth Government any relation of principal and agent which would entitle the wool-owners to an account of them; (2) that there was no authority given by the Imperial Government to the Commonwealth Government as its agent to offer to purchase the wool at the price specified and on particular terms as to distribution of the profits; (3) that when the skin wool for the seasons 1918-1919 and 1919-1920 was delivered there was no offer outstanding to purchase skin wool except on the basis that the sellers would not participate in the distribution of the share of the profits and the other profits which accrued, and accordingly there was no contract except on that basis; (4) that the Commonwealth Government did not requisition the wool, for there was no legal compulsion on any wool-owner to dispose of his wool to the Commonwealth.

Held, therefore, that suppliers of skin wool had no cause of action against the Commonwealth or the Central Wool Committee in respect of their refusal to allow the suppliers of skin wool to participate in the distribution of the share of the profits and the other profits which accrued.

Decision of the High Court John Cooke &Co. Pty. Ltd. v. The Commonwealth, (1921-22) 31 C.L.R. 394, affirmed.

APPEAL from the High Court.

This was an appeal by the plaintiffs from the decision of the High Court: John Cooke &Co. Pty. Ltd. v. The Commonwealth (1).

The judgment of their Lordships, which was delivered by Viscount

CAVE, was as follows :-

This appeal raises questions as to the extent to which sellers of skin wool (or wool taken from the skin of the sheep after slaughter) are entitled to share in a fund arising out of the purchase by the

1(1921-22) 31 C.L.R. 394. 34 CLR 271

British Government of the wool clip of Australia for the years 1918-1919 and 1919-1920. The facts leading up to the dispute may be shortly stated as follows :-

In the month of November 1916 the Imperial Government, being anxious to insure an adequate supply of wool for the military needs of the British and Allied Armies, entered into negotiation with the Government of the Commonwealth of Australia with a view to the purchase of the wool clip of Australia for the season 1916-1917 and by a series of telegrams exchanged between the two Governments it was arranged that the Imperial Government should acquire through the Commonwealth Government the entire crossbred and merino clip of Australia for the wool year ending on 30th June 1917, except wool which had passed under the hammer before 23rd November 1916 and except wool required for local manufacturing purposes. The price of the clip as a whole was fixed at 151d. per lb. of greasy wool f.o.b. Australia, with a further sum not exceeding gd. per lb. for handling charges; but it was agreed that, in the event of any profit being realized from the sale by the British Government of any surplus wool which might remain after the military requirements of the British and Allied Armies had been satisfied, such profit should be shared by the British Government with the Government of Australia. During the negotiations for this agreement the Prime Minister of Australia, Mr. Hughes, summoned a conference of persons representing the different interests in the Australian wool industry (growers, dealers and fellmongers) and took their advice on the question of price but the agreement ultimately made was entered into between the two Governments only, and it was left to the Australian Government to make its own arrangements for the acquisition of the clip and the distribution of the price among the wool-owners.

The arrangement with the British Government having been concluded, and the preliminary assent of the wool-owners having been thus obtained, the Commonwealth Government proceeded to make its arrangements for carrying out the scheme. On 20th December 1916 the Governor-General, acting under the powers conferred by the War Precautions Act 1914-1916, made regulations called the War Precautions (Wool) Regulations 1916

34 CLR 272

and the War Precautions (Sheepskins) Regulations 1916. By the Wool Regulations it was provided, among other things, (2) that for the purposes of the regulations there should be a Central Wool Committee consisting of two wool-growers, three wool-sellers, one wool-buyer, one manufacturer, and one scourer or fellmonger, with an independent chairman, and also in each State a State Wool Committee constituted in like manner; (5) that the Central Committee should have the control of the administration of the regulations subject to the directions of the Prime Minister (6) that the State Committees should comply strictly with all instructions issued to them by the Central Committee (10) that no person should sell any wool or tops except through or to or with the consent of the Central Wool Committee or otherwise in accordance with the regulations; (12) that the limits for each description of wool throughout the Commonwealth should be fixed by the Central Committee as far as possible in proportionate relation to the prices ruling for that description in the Australian market during the months of October and November 1916, but SO that the average of the total payments per pound should not exceed the price to be paid by the Imperial Government for the wool (13) that it should be the duty of each State Committee to arrange for the appraisement of the prices to be paid for each parcel of wool in accordance with the list of limits fixed by the Central Committee; and (24) that the general policy to be observed in the administration of the regulations should be equality of treatment. Provision was also made by the regulations for the appraisement by sworn appraisers of each parcel of wool submitted according to its value. By the Sheepskin Regulations it was provided that fellmongered wool should be subject to appraisement in accordance with the Wool Regulations.

In accordance with these regulations a Central Wool Committee and State Wool Committees were duly appointed. The Central Committee divided the wool into classes or categories (848 in number) according to its description, sworn appraisers were appointed by the State Committees, and the wool-ownerswhether growers, dealers or fellmongers-duly submitted their wool for appraisement. In theory a wool-owner was entitled to remain outside the scheme but in view of reg. 10 above quoted and of other circumstances

34 CLR 273

this would have been a ruinous course, and in fact all the owners came into the scheme. Upon the completion of an appraisement the Commonwealth Government, being put in funds for the purpose by the Imperial Government, paid to the wool-owner 90 per cent of his appraisement, the remaining 10 per cent being retained to cover any contingencies and being paid to the wool-owner at the close of the season on 30th June. The Commonwealth Government also at the close of the season divided among the wool-owners in proportion to their appraisements any surplus of the total flat rate of 151d. per lb. received from the Imperial Government for the total purchases for the season, and also all or some part of (1) the interest earned by the 10 per cent retention money during the period of retention, and (2) the profit earned on the exchange between London and Australia; and the Commonwealth Government also expressed its intention of dividing in like manner (3) the Australian moiety of the profit from wool sold by the British Government for other than military purposes when received. No regulation or contract requiring the Commonwealth Government to divide in the manner above mentioned the items numbered (1), (2) and (3) appears to have been made; but the intention of that Government to make the division was announced by Mr. Hughes in Parliament, and effect was duly given to the announcement. In making these distributions the Commonwealth Government during the first season made no distinction between the sellers of shorn wool and of skin wool.

Towards the close of the wool season 1916-1917 telegrams were exchanged between the Imperial and Commonwealth Governments by which it was agreed that the existing arrangement between them should be extended to cover the clip for the year 1917-1918. These telegrams made no mention of the method of distribution in Australia of the price paid by the British Government and the earnings and profit above mentioned, but in fact the method was continued in the same manner during this second year.

By a telegram dated 7th June 1918, the British Government offered to purchase the Australian wool clip for the period of the War and for one full wool year commencing on 30th June after the termination of hostilities, the appraisement prices averaging 151d. to be continued on the existing system and Australia to receive half

34 CLR 274

of any excess profits from wool sold for other than military purposes. By a telegram dated 12th June the Commonwealth Government on behalf of the Australian wool-growers accepted this offer, the handling charges being increased to 3d. per lb. This extension of the agreement was forthwith announced in Parliament by the Acting Prime Minister, Mr. Watt, who, after referring to the flat rate of 151d. per lb. and the handling charges, added: "The Australian wool-growers will participate to the extent of 50 per cent in any profit accruing from any sale of wool for other than British Govern- ment purposes."

Shortly after this announcement a change was made in the method of distribution which gave rise to these proceedings. On various occasions during the first two seasons the question had been raised in the Central Wool Committee (to which the administration of the regulations had been delegated) whether the fellmongers and other suppliers of skin wool should be allowed to share in the profits of the transaction over and above the flat rate of 151d. per lb., or whether those profits should be divided among the growers and sellers of shorn wool only. The reason given for this proposed differentiation was that the skin-wool owners were not growers or producers of wool, but only middlemen who bought sheepskins and sold the resultant wool, and accordingly did not (like the pastoralists) bear the risk incurred in rearing the sheep and also that they did not deal in merino wool, upon which the profit would mainly accrue. But, although the matter had been discussed, no action had been taken, and the skin-wool suppliers had been permitted to share in these profits ratably with the suppliers of shorn wool. At meetings of the Central Wool Committee held on 26th and 27th June 1918. the question was again raised, and ultimately the following resolution was adopted Agreed unanimously That all skin wools shall be paid on the flat-rate price basis of 151d. per lb. and shall not participate in any profits from any source over and above that flat-rate price. This decision shall operate from 1st July 1918." This resolution was confirmed by the Acting Prime Minister, and communicated to the fellmongers and other persons interested. who protested vigorously against any diminution of their share of the proceeds of future wool clips but they were informed that

34 CLR 275

skin wool would only be appraised and taken over on the terms laid down by the Committee. Ultimately the skin-wool owners, under protest, submitted their wool for appraisement on the above conditions, but expressed their intention of leaving their rights to be enforced by the proper tribunal.

It should be added that no question has arisen between the British and Australian Governments. the whole of the moneys payable by the former Government for the wool (which are said to exceed £180,000,000) having been paid to the Commonwealth Government and placed to the credit of the Wool Committee and also that (as their Lordships were informed) the Commonwealth Government have no intention of retaining for the public benefit the share of profits withheld from the skin-wool owners, but propose to divide it among the owners of shorn wool.

On 7th October 1920, the extended period of purchase having expired and a large sum representing profits being in the hands of the Central Wool Committee, or being about to be paid to them for distribution, the appellants on behalf of themselves and all others, the vendors or suppliers of skin wool under the provisions of the regulations, brought this action in the High Court of Australia against the Commonwealth of Australia, the Prime Minister (Mr. Hughes), the Central Wool Committee and the members of that Committee, claiming a declaration that the vendors of skin wool were entitled to participate with the vendors of shorn wool in the distribution of all moneys paid or to be paid by the Imperial Government in respect of wool appraised or sold, and in the distribution of all other moneys payable to suppliers or vendors of wool under the regulations, and claiming consequential relief. At the first hearing of the action the High Court (consisting of Knox C.J. and Gavan Duffy and Starke JJ.) delivered a judgment whereby they held that the plaintiffs were not (as they contended) entitled to recover on the basis that the Commonwealth had contracted with the plaintiffs or had placed itself in the relation of agent to the plaintiffs or any of them but it having been suggested during the argument that the suit was in fact for the administration of a fund in the hands of the Commonwealth or of the Central Wool Committee or for the determination of the rights of skin-wool

34 CLR 276

suppliers and shorn-wool suppliers in that fund, the Court declined to determine that question in the absence of some representatives of the shorn-wool suppliers as parties to the suit and gave leave to amend by adding parties for that purpose and otherwise. Thereupon the respondents Mackay and Murphy were added as defendants and were appointed by the Court to represent all vendors and suppliers of shorn wool, and the pleadings were duly amended. At the resumed hearing of the suit the learned Judges of the High Court held that there was not (as then contended) any enforceable contract of purchase and sale between the Imperial Government and the owners of skin and shorn wool, but at the most an arrange- ment between the two Governments not cognizable by any Court of law, and that the distribution of the moneys received from the Imperial Government had been left by the Commonwealth in point of fact and by the regulations in point of law to the wisdom, fairness and discretion of the Central Wool Committee and the Court accordingly dismissed the action with costs. Thereupon leave was obtained to prosecute the present appeal.

The principal contention urged on behalf of the appellants was that, on the true reading of the telegrams exchanged between the two Governments and the other evidence in the case, a contract was concluded between the Imperial Government and the Australian wool-owners (by the Government of the Commonwealth as their agent) for the purchase and sale of the wool clip during the currency of the arrangement and in particular that the telegrams of 7th and 12th June 1918, by which the arrangement for the purchase of the clip was extended (in the events which happened) from 1st July 1918 until 30th June 1920, constituted such a contract. The contract SO made, it was said, expressly or impliedly entitled the whole body of wool-owners to have the interest and profits in dispute (as well as the fixed price of 151d. per lb.) divided among them according to the method followed in the two preceding years, and this right could not be modified by any action of the Commonwealth or of the Central Wool Committee. In support of this view, counsel for the appellants relied upon the terms of the telegrams of 7th and 12th June 1918, which were as follows :-Cablegram dated 7th June 1918, from the Secretary of State for the Colonies to the

34 CLR 277

Governor-General :- " As the existing arrangements for the purchase of wool are coming to an end His Majesty's Government are anxious to enter into negotiation to extend them on a basis suitable to both Governments. His Majesty's Government are willing to purchase the Australian clip for the period of the War and for one full wool year commencing 30th June after the termination of hostilities. We propose that appraisement prices averaging 1s. 31d. shall be continued on present system. We are willing to pay slight increase for handling charges if rendered necessary by the increased cost. We propose that the basis price shall be final as regards wool used for British Government purposes. We propose that as regards wool sold for other purposes Australia shall receive half of any excess which may be obtained over basis prices. It is understood that during the currency of the contract the Imperial Government will not purchase the wool clips of other overseas countries on a higher basis than the Australian without first consulting Government of Commonwealth of Australia. Of course, in estimating a basis corresponding to Australian basis reasonable allowance must be made for the value of the partnership arrangements with Australia." Cablegram dated 12th June 1918, from the Governor-General to the Secretary of State for the Colonies :- Replying to your cable of 7th June, the Commonwealth Government on behalf of Australian wool-growers accepts the offer of His Majesty's Government to extend the purchase of the Commonwealth wool clips for the period during the currency of the War and one full wool year commencing on 1st July after the termination of hostilities and ending on 30th June following. The flat rate of 1s. 31d. per pound of greasy wool as at present shall be continued, but the rate for handling charges shall be raised from gd. to 3d. per pound. Such prices shall be final as regards wool for British Government purposes. As regards wool sold for other purposes Australia shall receive half of any excess profits which may be obtained over basis prices. Provisions as to Australian control appraisement methods payment as under current agreement."

It was urged that the acceptance of the British Government's offer by the Commonwealth Government " on behalf of Australian wool-growers was proof of the alleged agency, and that the

34 CLR 278

concluding words of the acceptance "provisions as to Australian control appraisement methods payment as under current agreement were sufficient to import into the bargain the then existing method of distributing the purchase price and share of profits among all the suppliers of wool.

In their Lordships' opinion these contentions cannot be sustained. The proposal contained in the British Government's telegram of 7th June was for a continuance during a further period of the existing arrangement between the two Governments; and when the documents on which that arrangement rested are examined it is found that from beginning to end the Commonwealth Government was treated as acting as the agent, not of the Australian wool suppliers, but of the British Government. In support of this view the following telegrams may be quoted :-22nd November 1916, Governor-General to Secretary of State: "The Commonwealth Government to be the sole agent for Great Britain in the whole transaction." 30th November 1916, Secretary of State to Governor-General "His Majesty's Government concur in proposal that Commonwealth Government shall act as sole agent of Imperial Government in the transactions." 11th December 1916, Governor- General to Secretary of State "Price arrived at, viz., 15}d. per pound greasy wool is the price fixed by growers and the price at which we are prepared to acquire clip on behalf of British Government." 13th December 1916, Secretary of State to Governor-General: "With reference to your telegram of 10th December, His Majesty's Government agree to the proposal that wool clip should be secured on its behalf by Government of the Commonwealth of Australia on the basis of average price of 15ld. per pound greasy wool in good condition," &., &. These expressions in the telegrams were confirmed by statements made by Ministers in Australia. For instance, at the conference with representative wool-growers held on 21st November 1916, while the arrangement was being negotiated, the Prime Minister (Mr. Hughes) stated clearly that the Commonwealth Government would act as agents of the British Government and like statements were made in Parliament by Mr. Hughes on 14th and 20th December 1916, by Sir John Forrest (the Treasurer) on 6th March 1917, and

34 CLR 279

by Mr. Hughes on 25th July 1917. Mr. Hughes' statement on 20th December 1916 was in the following clear terms :- The purchaser is the Imperial Government. The agent for the Imperial Government is the Commonwealth Government, and the head of the Commonwealth Government is in actual control of the scheme.' When the documents are read as a whole, it is plain that throughout the transaction the Commonwealth Government was acting as the representative of the Imperial Government authorized to secure the wool clip for that Government on the basis price of 151d. per pound, and not as agent for an indeterminate body of wool-owners. The offer of 7th June 1918 was made to the Commonwealth Government in that capacity, and not through that Government to the wool-growers, and the Commonwealth Government could not, by purporting to accept the offer on behalf of Australian wool-growers, fix the British Government with a contract with a large number of persons of whom they knew nothing and with whom they did not intend to contract. The expression quoted probably meant only that the offer was accepted in the interest of the wool-growers.

Further, the offer of 7th June did not contain any stipulation that the existing practice, by which not only the price of the wool but also the Australian share of profits and earnings was distributed among the wool-owners, should be continued. This practice does not appear to have been even communicated to the Imperial Government, and it formed no part of the arrangement under which the purchase of wool was effected during the seasons 1918-1919 and 1919-1920. The expression appraisement prices averaging 1s. 31d.," contained in the telegram of 7th June, plainly did not include the profits and earnings; and the reference in the concluding sentence of the telegram of 12th June to "methods of payment is naturally to be referred to the payments made by the Imperial Government to the Commonwealth Government rather than to those made by the latter Government to the wool-owners. The attitude of the Imperial Government throughout was that described at a later period by the British Director-General of Raw Materials when (in a telegram quoted in the judgment of the High Court) he said " This Department is not concerned with the distribution in Australia of wool profits.

34 CLR 280

Lump sums will be paid to Commonwealth authorities, who will make the distribution on their own responsibility."

Taking the evidence as a whole, their Lordships are of opinion that the only contract or arrangement into which the British Government entered was an arrangement with the Commonwealth Government, not enforceable by any Court, to purchase the clip through the Commonwealth Government at the all-round price of 151d. per 1b. with an addition for handling charges, and to pay to the Commonwealth Government one-half of any profits derived from the sale of wool for other than military purposes, and that it was left to the Commonwealth Government to make its own terms with the wool-owners as to the distribution among them of the price paid for the wool and any share of profits. It may have been contemplated by both Governments that the flat rate should go to the wool-owners; but the share of profits was to be paid to the Commonwealth Government for the benefit of Australia, and it was left open to that Government either to pay the amount into the Consolidated Fund of the Commonwealth or to dispose of it in any other way. As to the earnings in interest and exchange, the British Government never attempted to control their disposition or even referred to their existence. As to these profits and earnings. therefore, there was no contract by the Imperial Government with the wool-owners of any kind, nor was there as between the wool owners and the Commonwealth Government any relation of principal and agent which would entitle the former to an account of them.

But it was argued in the alternative that, even if this be so, at all events the Imperial Government instructed the Commonwealth Government as their agents to offer to purchase the wool at the price specified and upon the existing terms as to distribution of the profits, and that these instructions could not be modified by any resolution of the Central Wool Committee. To this alternative contention there are two answers, either of which is sufficient to dispose of it :-In the first place (as already indicated) the Imperial Government gave no instructions for purchase on the existing distribution terms, with which that Government in no way concerned itself. And in the second place, even assuming that such instructions were given and that the conditions in fact laid down by the Wool

34 CLR 281

Committee departed from those instructions, it is not open to any wool-supplier to complain of the variation. The Wool Committee (whose action has been adopted and ratified by the Commonwealth Government) elected to make the offer of purchase upon the terms of their resolution, and on no others. The wool-owners could only accept or refuse the offer as made to them; and they could not, by purporting to accept a different offer or by sending in their wool under protest, put upon the Government a contract to purchase upon terms different from those contained in the offer actually made. This argument, therefore, also fails.

Reference was also made to the decision in Carlill v. Carbolic Smoke Ball Co. 1 and to similar cases in which it has been held that an offer made by advertisement, when accepted by any of the persons to whom it is addressed, may constitute a contract: and it was argued that, on the promise of the Commonwealth Government to divide the profits among the wool-owners being announced in Parliament and accepted by those owners by the delivery of their wool, a contract ensued which entitled each owner delivering his wool upon the faith of the promise to have the terms performed in his favour. No precise evidence appears to have been given of the publication of the statement made by Mr. Watt in Parliament, but it may well be that the announcement was generally known among wool-owners and if it had been proved that the skin-wool owners had delivered their wool on the faith of that announcement they might have been held entitled to payment on the terms announced. But in fact no such proof was given. On the contrary, it was clearly proved that before any skin wool of the 1918-1919 and 1919-1920 clips was accepted for appraisement notice was given to the appraisers, and through them to the wool-suppliers, that the suppliers of skin wool would not participate in any dividends over and above the flat rate of 151d. per pound greasy wool, and that skin wool would not be accepted for appraisement except on that condition. There was, therefore, when this skin wool was delivered, no offer outstanding to purchase that wool except on the basis that

1(1893)1 Q.B. 256. 34 CLR 282

the sellers would not participate in the profits or earnings in question, and accordingly there was no contract with them except on that basis.

As a last alternative it was suggested that the Commonwealth Government must be taken to have requisitioned the appellants' wool and accordingly must pay for it on requisition terms, which (it was said) would not be less favourable to the appellants than those which were conceded during the earlier period. In their Lordships' opinion there is no foundation for this suggestion. Reg. No. 10 of the Wool Regulations did indeed forbid the sale of wool except through or to or with the consent of the Central Wool Committee or otherwise in accordance with the regulations; and this regulation no doubt made it difficult, if not impossible, for a wool-owner to dispose of his wool except to the Commonwealth Government and on the terms offered by that Government. But there was no legal compulsion on any wool-owner to bring in his wool for sale. The Commonwealth Government proceeded throughout by the method of agreement, and resort was never had to the method of requisition.

For these reasons their Lordships agree with the decision of the High Court that the action fails; and they will humbly advise His Majesty that this appeal should be dismissed with costs.