Logan Downs Pty Ltd v Federal Commissioner of Taxation

[1965] HCA 16

HIGH COURT OF AUSTRALIA

Barwick C.J., Kitto, Taylor, Menzies, Windeyer and Owen JJ.

LOGAN DOWNS PTY. LTD. v. FEDERAL COMMISSIONER OF TAXATION

(1965) 112 CLR 177

9 April 1965

Constitutional Law (Cth)

Constitutional Law (Cth)—Powers of Commonwealth—Taxation power—Trade and commerce power—Wool industry legislation—Interdependence of various enactments—The Constitution (63 and 64 Vict. c. 12), s. 51 (i.), (ii.)—Wool Tax Acts (No. 1) to (No. 5) 1964 (Cth)—Wool Industry Act 1962-1964 (Cth), ss. 5*, 24**.

Decisions

April 9.
The following written judgments were delivered:-
BARWICK C.J., KITTO, TAYLOR, MENZIES AND WINDEYER JJ. The plaintiff company is a wool grower which sues the Commonwealth of Australia and others seeking (1) declarations that the Wool Tax (Administration) Act 1964 (Cth), the Wool Tax Act (No. 1) 1964 (Cth) and the Wool Industry Act 1962-1964 (Cth) are invalid and (2) orders against Dalgety &New Zealand Loan Ltd. requiring it to pay the sum of 1,142 Pounds 19s. 4d. to the plaintiff, and not to the Commissioner of Taxation. This sum was, in compliance with the provisions of the Wool Tax (Administration) Act, deducted out of the proceeds of shorn wool sold on the plaintiff's behalf in August 1964. In addition to formal allegations and allegations relating to the deduction of the sum claimed, there are in the statement of claim a number of allegations concerning (i) the purpose for raising the taxes imposed by the Wool Tax Acts (No. 1) to (No. 5) (Cth); (ii) the payments to be made from the Consolidated Revenue Fund to the Australian Wool Board; (iii) the expenditure by the Australian Wool Board of the moneys so paid to it; and (iv) the knowledge of the Treasurer of the Commonwealth and the Commissioner of Taxation about the foregoing matters. The defendants, other than Dalgety &New Zealand Loan Ltd. - which has submitted to such order as the Court may see fit to make - have demurred to the statement of claim, asserting the validity of the three laws challenged and the lawfulness of the payments to and by the Australian Wool Board. The right of the plaintiff to question the validity of the Acts and the lawfulness of the payments referred to in the statement of claim have also been put in issue. (at p184)

2. The salient features of the legislation under consideration can be stated shortly. The Wool Industry Act 1962-1964 established the Australian Wool Board with the functions which are stated in s. 24(1) and are confined by s. 5. These sections are as follows:-

"24 - (1) The functions of the Board are - (a) to promote the use of wool and wool products in Australia and other countries; (b) to inquire into, and from time to time report to the Australian Wool Industry Conference upon, methods of marketing wool and any other matters connected with the marketing of wool; and (c) such other functions as are conferred on the Board by this Act or, being functions conducive to the achievement of an object of this Act, are approved by the Minister". (at p185)

3. "5 - (1) The objects of this Act are - (a) to promote the export from Australia of wool and wool products; (b) to promote trade and commerce in wool and wool products among the States, between States and Territories and within the Territories; (c) to encourage the production, and the use, of wool and wool products in the Territories; and (d) to ensure the availability, when a state of war, or danger of war, exists, of wool stores for use for the purposes of the defence of the Commonwealth, and this Act shall be construed and administered accordingly. (at p185)

4. (2) The Board, the Authority" (i.e. the Australian Wool Testing Authority) "and any committee established by or under this Act shall not perform its functions or exercise its powers except for the purpose of achieving an object specified in the last preceding sub-section." (at p185)

5. The only other provisions requiring particular notice are ss. 32 and 32A, which are as follows: - "32. There shall be paid to the Board, out of the Consolidated Revenue Fund, which is appropriated accordingly, amounts equal to the amounts received by the Commissioner of Taxation in respect of tax imposed by any Wool Tax Act, less Two shillings for each bale, One shilling for each fadge or butt, and Threepence for each bag, of wool in relation to which the Commissioner receives an amount in respect of tax imposed by a Wool Tax Act." (at p185)

32A. There shall also be paid to the Board, out of the Consolidated Revenue Fund, which is appropriated accordingly, amounts equal to the amounts received by the Commissioner of Taxation in respect of tax imposed by any Wool Tax Act during the period of three years commencing on the first day of July, One thousand nine hundred and sixty-four, less Twelve shillings for each bale, Six shillings for each fadge or butt, and One shilling and sixpence for each bag, of wool in relation to which the Commissioner receives an amount in respect of tax imposed during that period by a Wool Tax Act." (at p185)

6. The Wool Tax Act (No. 1) imposes a tax of two per cent on the sale value of shorn wool produced in Australia and sold by a wool broker after 1st July 1964. There are four other Wool Tax Acts, each imposing a like tax in respect of some other shorn wool produced in Australia. In the result, all shorn wool produced in Australia is taxed once at the rate of two per cent of its sale value. The Wool Tax (Administration) Act requires any wool broker who sells shorn wool for another to pay the tax imposed by the Wool Tax Act (No. 1) and authorizes recoupment of an amount equal to the tax paid, by retention out of the proceeds of the wool sold or by recovery from the person for whom the wool is sold. (at p186)

7. Three contentions were put forward on behalf of the plaintiff: - (1) That the Wool Tax Act (No. 1) is invalid because either - (a) its "association" with the Wool Industry Act and its "purpose", viz. to make provision for the payment to the Australian Wool Board of moneys to be expended by the Board in the exercise of functions beyond the power of Parliament to confer, show that the Act is merely part of a law for the establishment of the Australian Wool Board and is not a law with respect to taxation within s. 51(ii.) of the Constitution; or (b) the Wool Tax Act was not intended by the Parliament to be operative unless the Wool Industry Act is, as a whole or at least in its cardinal provisions, valid and operative in accordance with its terms. (at p186)

8. (2) That the Wool Industry Act is invalid because the functions thereby conferred upon the Australian Wool Board purport to enable that Board to engage in activities beyond those which the Parliament has power to authorize. (at p186)

9. (3) That the plaintiff has locus standi to sue as it has done because - (a) the Wool Tax Act (No. 1) attempts invalidly to impose liability upon it; and/or (b) if that Act be valid, the moneys payable by the plaintiff thereunder will, if the Wool Industry Act is invalid, be expended unlawfully by the Australian Wool Board. (at p186)

10. Although the plaintiff could not succeed without successfully challenging the validity of the Wool Industry Act, we are satisfied that it fails at a point which makes it unnecessary for us to consider the validity of the various provisions of that Act. The crux of this case is the validity of the Wool Tax Act (No. 1) and we are satisfied both that it is a law with respect to taxation and that its operative force has not been made to depend upon the validity of the Wool Industry Act. (at p186)

11. The argument that the Wool Tax Act (No. 1) is not what it so obviously appears to be (i.e. a law imposing taxation) was elusive. It emphasized an association between the Wool Tax Acts and the Wool Industry Act and invited the inference that the former were enacted to raise money to increase the Consolidated Revenue Fund to make partial provision against the appropriations thereout made by ss. 32 and 32A of the latter. However, even to draw this inference would not lead to the conclusion that the Wool Tax Acts were not laws with respect to taxation. It would do no more than reveal why Parliament had imposed the taxation in question. (at p187)

12. The starting point of the other submission involving the invalidity of the Wool Tax Act (No. 1) was that the various Acts here under consideration form a scheme. Of course, in one sense they do. It is obvious that it requires money to carry out the provisions of the Wool Industry Act and it is no less obvious that Parliament decided that part of the cost of the administration of that Act should, in an economic sense, be borne by the wool producers as the special group to be benefited by the operation of the Act and that the remainder of that cost should be borne by the general body of taxpayers. Nevertheless, the invalidity of the Wool Industry Act would entail the invalidity of the Wool Tax Acts only if it were to appear from the Acts themselves that the latter were not intended to operate except in conjunction with the full operation of the former according to its terms. No such legislative intention appears. What Starke J. said in relation to the group of Acts under consideration in the first uniform tax case, South Australia v. The Commonwealth (1942) 65 CLR 373, at p 448 , applies here. His Honour said: "But the scheme of legislation is, I think, unimportant unless the legislation is connected together and the provisions of the legislative Acts are dependent the one upon the other, which is not, as I think, the case here"(1942) 65 CLR, at p 448 (at p187)

13. Once the attack upon the validity of the Wool Tax Act (No. 1) fails, as we think it does for the reasons we have just given, the plaintiff's whole case fails because, except as part of a case that the Wool Tax Act (No. 1) is invalid, the plaintiff has no interest which entitles it as a matter of law to challenge the validity of the provisions of the Wool Industry Act or the payments which they authorize. (at p187)

14. There are, however, some observations which we think we should take the opportunity of making upon two of the arguments whereby it was sought to invalidate the Wool Industry Act. Firstly, we reject the somewhat surprising contention that s. 51(i.) of the Constitution does not authorize the making of laws to permit or encourage trade between Australia and other countries. There is, of course, no authority to support such a contention; indeed, such authority as there is points the other way. Independently of authority, however, we have no doubt whatever that laws for the promotion of Australia's international trade are authorized by the trade and commerce power. Secondly, we affirm what we would have thought to be beyond question, namely, that the functions of the Australian Wool Board are to be ascertained by reading s. 24 of the Wool Industry Act, as restricted by s. 5(2), so that, whatever might be thought about the validity of s. 24 standing by itself, its validity is assured by reading it as so limited. Should the Australian Wool Board engage in activities beyond its functions as so defined, there are, of course, effective procedures to restrain it, but an action by an individual asserting a particular interest of his own merely as a taxpayer, to give him locus standi to maintain an action, is not one of those procedures. (at p188)

15. It is for the foregoing reasons that we consider the demurrer should be upheld and, because the decision goes to the whole subject matter of the action, we consider that there should also be judgment for the defendants in the action. (at p188)

OWEN J. By its statement of claim, to which the defendants have demurred, the plaintiff attacks the validity of the Wool Tax Act (No. 1) 1964, the Wool Tax (Administration) Act 1964 and the Wool Industry Act 1962-1964. The Wool Tax Act (No. 1) imposes a tax, being a percentage of the sale price of the wool, on all shorn wool produced in Australia and sold by a wool broker. There are similar taxing Acts imposing tax upon the sale value of shorn wool purchased by a wool dealer from a person other than a wool broker (the Wool Tax Act (No. 2)); upon the sale value of shorn wool purchased by a manufacturer from a person other than a wool broker or wool dealer (the Wool Tax Act (No. 3)); upon the sale value of shorn wool subjected by a manufacturer to a process of manufacture (the Wool Tax Act (No. 4)); and upon the sale value of shorn wool produced in and exported from Australia (the Wool Tax Act (No. 5)). In each Act provision is made to ensure that the tax is not imposed more than once in respect of the same wool. The Wool Tax (Administration) Act provides the machinery for the payment and collection of the tax imposed by each of the Tax Acts. It is administered by the Commissioner of Taxation and all moneys collected under it are, by s. 81 of the Constitution, required to be paid into the Consolidated Revenue Fund. It defines the persons liable to pay the tax (s. 11) and, by s. 12, requires the wool broker, wool dealer, manufacturer or exporter, as the case may be, to pay the tax with the right to recover the amount so paid from the person liable, under s. 11, to pay the tax. Under Pt II of the Wool Industry Act the Australian Wool Board is established. Its functions are to promote the use of wool and wool products in Australia and other countries; to inquire into and report upon methods of marketing wool and any other matters connected with the marketing of wool; and to perform such other functions as are conferred upon it by the Act or being functions conducive to the achievement of an object of the Act are approved by the Minister (s. 24(1)). For these purposes it is empowered (inter alia) to use such means as it thinks fit for the purpose of promoting the use of wool and wool products including (i) the use of publicity; (ii) the encouraging of research in connexion with the production or use of wool; and (iii) the encouraging of the improvement of production of wool in Australia (s. 24(2)). Section 5(1) declares that the objects of the Act are (a) To promote the export from Australia of wool and wool products; (b) To promote trade and commerce in wool and wool products among the States, between States and Territories and within the Territories; (c) To encourage the production and the use of wool in the Territories; and (d) To ensure the availability in time of war or when danger of war exists of wool stores for use for purposes of defence. So far as the Territories are concerned, pars. (b) and (c) are no doubt based upon s. 122 of the Constitution while par. (d) is based upon the defence power. Section 5(2) provides that the Board, the Authority (which means the Australian Wool Testing Authority established under Pt III of the Act and with the powers and functions described in that Part) and any committee established under the Act shall not perform its functions or exercise its powers except for the purpose of achieving an object specified in s. 5(1). The Board's functions, as set out in s. 24(1), are therefore to be exercised subject to the limitations imposed by s. 5. Provision is made for financing the Board's operations by ss. 32 and 32A. Section 32 directs the payment to the Board out of the Consolidated Revenue Fund, which is appropriated accordingly, of amounts equal to the amounts received by the Commissioner of Taxation in respect of tax imposed by the various Wool Tax Acts less certain deductions, and s. 32A appropriates out of the Consolidated Revenue Fund certain other moneys which are to be paid to the Board. (at p189)

2. The submissions made on behalf of the plaintiff were to the following effect. The enactment of the Wool Industry Act was not within the legislative competence of the Parliament. A law establishing a body to exercise the functions set out in s. 24 of the Act for the purpose of promoting the export and inter-State trade in wool and wool products is not a law with respect to trade and commerce with other countries and among the States and there is no other head of power which could justify such a law. The Act cannot be read down so as to limit the exercise of the Board's functions to those directed to achieving the other objects set out in s. 5(1). It is therefore wholly invalid and the Parliament cannot validly appropriate moneys out of the Consolidated Revenue Fund for the purpose of carrying the Act into effect. When the group of Acts, consisting of the Wool Industry Act, the Wool Tax (Administration) Act, and the Wool Tax Acts, are examined it becomes apparent that the taxes imposed by the Tax Acts are levied for the purpose of financing operations which the Commonwealth cannot lawfully undertake. The Tax Acts are therefore outside the taxation power contained in s. 51(ii.) of the Constitution and the plaintiff, being a person upon whom has been levied the tax imposed by one of those Acts, is entitled to challenge its validity. (at p190)

3. I am unable to agree with these propositions. The submission that a taxing Act which, on its face, is a valid exercise of the taxing powers conferred by s. 51(ii.) is invalid or may become so if it appears that the Commonwealth intends to expend or has expended moneys out of the Consolidated Revenue Fund for some purpose which is not a Commonwealth purpose, whether the amounts appropriated for that purpose are the equivalent of or greater or lesser than the amount raised by the taxing Act, cannot be sustained. It is possible to imagine a case in which a legislative intention is disclosed that a Tax Act is not to operate in certain events or is to operate only upon the fulfilment of some condition precedent as, for example, if it were intended to take effect only upon the expenditure of moneys out of the Consolidated Revenue Fund for a particular purpose or if the intention was that it should cease to operate if some legislative provision necessitating the expenditure of Commonwealth moneys be held to be beyond power. In such cases, however, the taxing Act would not be ultra vires, it would be a valid law taking effect according to its tenor. The plaintiff's case was, of course, not put in this way and this is not such a case. Notwithstanding the arguments that were urged on behalf of the plaintiff I have no doubt that the Wool Tax Acts are a valid exercise of power and, for this reason alone, the statement of claim is demurrable. But I think it proper to add that I do not agree with the further submission that a law setting up a body to perform the functions set out in s. 24 in order to further the objects enumerated in s. 5(1) is not a valid law. The encouragement of the use of wool and wool products in Australia and elsewhere is directed to increasing world demand for those commodities. If that demand is increased, so much the better for Australia's export and inter-State trade in them. In so far as the law is directed to that end it is plainly a law with respect to trade and commerce with other countries and between the States. In so far as the law is designed to foster trade and commerce with and between the Territories and the production and use of wool and wool products in those Territories, it is validly made under the powers conferred by s. 122 of the Constitution and in so far as it is designed to ensure the availability in time of war or danger of war of wool stores in Australia, it is scarcely necessary to have in mind the happenings of the last two major wars in which Australia has been engaged to realize that it is within the defence power. (at p191)

4. I would uphold the demurrer and dismiss the action. (at p191)

Orders

Demurrers allowed. Judgment for the defendants with costs including the costs of the demurrers.