Morton v Union Steamship Co of New Zealand Ltd

[1951] HCA 42

83 CLR 402

THE UNION STEAMSHIP COMPANY OF

NEW ZEALAND LIMITED

OF A. Regulation-Excise-Duty-Liability for payment-Fixed by statute-Entension of

liability by regulation-Validity- - Excise Act 1901-1949 (No. 9 of 1901-N 46 of 1949), S. 164-Excise Regulations 1925-1948 (S.R. No. 181 of 1925-No. 95 SYDNEY,

of 1948), reg. 188. July 10, 26.

Section 164 of the Excise Act 1901-1949 which provides (inter alia): The Governor-General may make regulations not inconsistent with this Act prescribing all matters

as may be necessary or convenient to be prescribed for giving effect to this Act or for the conduct of any business relating to the Excise" authorizes regulations for the more effective adminis- tration of the provisions actually contained in the Act, but not regulations which vary or depart from the positive provisions made by the Act, or regulations which go outside the field which the Act marks out for itself.

Held therefore that reg. 188 of the Excise Regulations, which imposes a distinct and independent addition of liability to the liabilities imposed by the Act, is not merely incidental to the provisions of the Act or to its more effective administration and is invalid. DEMURRER.

In an action brought by him in the High Court by way of writ of summons, Charles Evors Morton, the Collector of Customs for the State of New South Wales, sought to recover from the Union Steamship Co. of New Zealand Ltd. the sum of £1,961 12s. 10d. said to be payable by the defendant to the plaintiff.

The amended statement of claim was substantially as follows :- 1. The plaintiff is the Collector of Customs for the State of New South Wales.

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2. The defendant is a company duly incorporated under the OF laws of the Dominion of New Zealand and registered as a foreign company under and in pursuance of the Companies Act 1936 (N.S.W.). The defendant is liable to be sued in and by its said corporate name and style.

(3. to 6. inclusive were not material for the demurrer or this report.)

7. On or about 23rd July 1945 the defendant had the control and custody of certain excisable goods, namely, 2,358 lbs. of manufactured tobacco, 221 lbs. of cigarettes and 600,000 cigarette papers pending exportation of those goods to parts beyond the seas and was responsible for the safe keeping of those goods while they were in its custody and control.

8. The defendant failed to keep safely the goods referred to in par. 7 hereof, whereupon by reason of reg. 188 of the Excise Regu- lations made pursuant to the Excise Act 1901-1949 it became liable to pay to the plaintiff an amount equal to the excise duty thereon.

9. The amount of excise duty payable on the goods referred to in par. 7 hereof was £1,324 2s. 5d.

10. The plaintiff has requested the defendant to pay to him the said sum of £1,324 2s. 5d., but the defendant has neglected and refused and still neglects and refuses to pay the same.

11. The plaintiff claims the sum of £1,961 12s. 10d., particulars whereof are as follows:-

£637 10s. 5d. (b) Amount payable by the defendant

to the plaintiff in consequence of the defendant's failure to keep safely certain excisable goods, namely, 2,358 lbs. of manufactured tobacco, 221 lbs. of cigarettes and 600,000 cigarette papers of which the defendant had control and custody pending exportation of the same to parts beyond the seas, such amount being equal to the excise duty payable in respect of such goods

£1,961 12s. 10d.

83 CLR 404

The defendant demurred to the statement of claim on the ground that the provisions of reg. 188 of the Excise Regulations were ultra vires and were void and of no effect.

The provisions of reg. 188 appear in the judgment hereunder. A. R. Taylor K.C. (with him J. K. Manning), for the defendant in support of the demurrer. From reg. 188 it would seem that if goods are lost, either by theft, as in this case, or by fire or other- wise, without negligence on the part of the person who has the control or custody of them, he is no longer able to account for them to the satisfaction of the collector. The person is made liable to pay if the goods are not safely kept or accounted for. The pro- vision in reg. 188 is quite unlike the provision in S. 92 (4) of the Customs Act 1901-1947, which deals with matters of this kind. The similar provision in the English Customs legislation was intended to secure payment of duty for the revenue (Brook's Wharf and Bull Wharf Ltd. v. Goodman Bros. 1 ). Even if the defendant paid the amount the manufacturer could still be sued, and the defendant would not have any right of recourse against the manufacturer because that is an independent liability and not a secondary liability to discharge the duty. By contrast, it is submitted that a provision such as this would be regarded as something intended to protect the revenue as it is something additional to the obligation to pay duties, and, indeed, the assump- tion is that it is something which cannot have been intended to protect revenue because the entry for exportation must be passed in terms of the Act, the only security was provided by the manu- facturer for the payment of the excise duty. That is in S. 60. The liability is secured and it is under reg. 188. The two first are alternative liabilities and one satisfies the other, while the second is cumulative and it can attach to the manufacturer himself.

[DIXON J. referred to Commonwealth v. Melbourne Harbour Trust Commissioners 2 and Union Steamship Co. of New Zealand V. The Commonwealth 3.]

It is not an obligation to pay duty and cannot be regarded as a provision intended to secure revenue or facilitate the collection of the revenue and to impose a complete obligation. It is an obligation which attaches irrespective of whether the defendant is negligent or not. The obligation to pay the sum is obviously not a penalty, it is not conditional upon default or neglect in any sense by the defendant and it is not an obligation to pay duties:

1(1937) 1 K.B. 534, at pp. 540-542, 2(1922) 31 C.L.R. 1. 3(1925) 36 C.L.R. 130. 83 CLR 405

but it is money for the use of the Crown purely and simply and, not being a licence fee, or a penalty or compensation, it must perforce, be a tax and is, therefore, bad (T. &J. Brocklebank Ltd. V. The King 1; Attorney-General v. Wilts. United Dairies Ltd. 2; The Commonwealth v. Colonial Combing, Spinning and Weaving Co. Ltd. 3 ). Even if it be not a tax reg. 188 is not within the regulation-making power conferred by S. 164 of the Excise Act 1901-1949. The regulation does not purport to carry out anything contemplated by the Act. It is intended to secure not the payment of any duty but something which is right outside the ambit of the regulation-making authority. The Act makes provision whereby the collector can adequately safeguard himself. The provision under the regulation is not in the nature of a penalty because it is not conditioned by a breach of regulation or upon any default or neglect on the part of the custodian. It is not a provision intended to transfer the burden of excise from the manufacturer to the custodian as is the case under the Customs Act 1901-1947 and the Customs Consolidation Act 1876 (Eng.), nor is it a provision directed to compensating anybody because of any neglect or default on the part of the custodian. In those circumstances it is quite outside the regulation-making power (Carbines v. Powell 4; Broadcasting Co. of Australia Pty. Ltd. v. The Commonwealth 5; Grech v. Bird 6

G. E. Barwick K.C. (with him B. P. Macfarlan), for the plaintiff to oppose the demurrer. It is conceded that reg. 188 is based on the words in S. 164 of the Excise Act which give power to make regulations as may be necessary or convenient. Those words were discussed and a regulation made thereunder was upheld in Gibson v. Mitchell 7.

[McTIERNAN J. referred to Brebner v. Bruce 8.] Regulation 188 (1) deals with excisable goods during the period they are subject to excise control, and with the person who has the actual control of those goods. It is directed to secure either the exportation of the goods on the one hand or the delivery of those goods into home consumption on the other hand. It is within the purview of the Excise Act not merely to get revenue, but to secure the arrival of those goods either at the

1(1924) I K.B. 647, at p. 651. 2(1921) 37 T.L.R. 884 (1922) 3(1922) 31 C.L.R. 421, at pp. 460, 4(1925) 36 C.L.R. 88, at pp. 91, 5(1935) 52 C.L.R. 52, at p. 63. 6(1936) 56 C.L.R. 228, at p. 239. 7(1928) 41 C.L.R. 275, at pp. 278, 8(1950) 82 C.L.R. 161. 83 CLR 406

export point, or into home consumption as the case may be,

Tax under the excise law is rightly used as an instrument of policy. Regulation 188 1 was plainly intended to make certain that in the interval between the removal from the manufacturer and the entry into home consumption or the final export, the goods are not allowed to drift into a channel for which they were not destined. The Act itself does not provide for that interim period, and thus reg. 188 makes control of the excise more effective. The general nature of the regulation is quite within the notion of an excise provision making effective the control of the excisable goods during the period that they are, by the Act, made subject to the control of the customs. The Parliament is entitled to use its power to carry out the policy of excise. Regulation 188 (1) is plainly within the Governor-General's power. It cannot be said that it is inconsistent with the Act, or that it was unreasonable for the Executive to be of opinion that that regulation was necessary or convenient for the administration of the Act, to enable control by the Customs over goods to be effective during the period when they are subject to the control of the Customs. If the foregoing be right and the imposition of the obligation is within power, assuming that the sanction is not inconsistent with the Act and no question of reasonableness arises, there would not be any ground for any argument that the sanction in reg. 188 2 was beyond power, subject to some statutory limitation. In both T. &J. Brocklebank Ltd. v. The King (1) and Attorney-General V. Wilts. United Dairies Ltd. (2) there was a monetary imposition without authority. Regulation 188 (1) is within power, whether it be dealt with as a sanction or a penalty. There is nothing in any customs or revenue law to prevent duty being payable two or three times. These provisions are traditional remedies in revenue laws of this nature. The obligation is placed without any question of negligence in conformity with customs law and the breach of the obligation is visited with sanctions or penalties and liability to pay a sum of money under civil action at the instance of the collector. The words amount equal to the duty" in sub-reg. (2) of reg. 188 are exactly the same in the context as the duty. Those words were introduced by the draftsman because he was dealing first of all with all the goods and then only with some part of them. The duty on the excisable goods he did not wish to lay as a duty proper on this person that is to say, he did not wish to render the goods dutiable in his hands. In Brook's Wharf and Bull Wharf

1(1924) 1 K.B. 647. 2(1921) 37 T.L.R. 884 ; (1922) 83 CLR 407

Ltd. v. Goodman Bros. 1 the amount was payable by the ware- houseman by virtue of the terms of a bond. " An amount equal to the duty " is the same as saying the amount of the duty on the excisable goods, and the intention was that the person should come under a secondary liability, if the manufacturer's liability be regarded as primary, to pay duty, and if he be paid it the manu- facturer, although he was liable to pay the duty, could not be asked for it, it having been paid. Regulation 188 (2), in its proper meaning, means the unpaid duty. It is immaterial that the duty can be recovered by way of more than one remedy, and it is beside the point that it is cumulative. There is nothing in customs law to make duty payable twice. It is also beside the point that it may be described as a tax it is authorized. The regulation provides for more effective control in the administration of the Act during the period the goods are subject to the control of the Customs. It imposes upon the person who has safe custody, on the breach of his obligation, a liability alternative to the liability of the manufacturer to pay duty. The proper construction of sub-reg. (2) of reg. 188 is that it does no more than impose an obligation upon the person who has safe custody to pay the amount of the duty. Whilst he may not have any right against the manufacturer, the necessary consequence is that the manufacturer cannot be called upon to pay. It is not right to suggest that there is only interest in money. The Act has an interest to ensure that the goods are kept and go to a particular place.

A. R. Taylor K.C., in reply. There is nothing in the regulation itself to restrict its operation to cases where the duty has been paid; on the contrary, the regulation clearly operates after duty has been paid. The regulation imposes the penalty on every person who has the custody and control of excisable goods while such goods are in course of removal &. It is quite clear that goods cannot be delivered for home consumption until an entry has been passed, and that an entry for home consumption cannot be passed until the duty has been paid see Excise Act 1901-1949, SS. 58, 59. The obligation exists until the delivery of home consumption goods. If the obligation exists for SO long, then it must exist notwithstanding the payment of duty. In relation to sub-reg. (3) of reg. 188, the draftsman, in using the expression an amount equal to the duty" in sub-reg. (2) was referring to some additional obligation. Either it must be the duty itself or some other obligation measured as to extent

1(1937) 1 K.B., at p. 542. 83 CLR 408

by the amount of duty payable on goods not safely kept.

If the condition is that a secondary liability is placed on the custodian and upon his discharge of that obligation the manu- facturer is freed of the obligation imposed upon him by the Act, then the regulation is inconsistent with the Act itself, which provides, by S. 54, that the manufacturer shall pay the duty, and, by S. 161, that the owner may also be liable. Section 153 of the Customs Act 1901-1935, which corresponds to S. 161 of the Excise Act 1901-1949, was relied upon in Wing On &Co. Ltd. V. The Collector of Customs (N.S.W.) 1. Even without a regulation there is ample protection in the Act itself. The collector can take a cash deposit by way of security. Under S. 117 he can take securities from anybody, including a warehouse keeper. But that obligation is not related to negligence or default or anything of that kind. The loss to be suffered by him is not in any way referable to neglect on his part. The obligation still exists if the duty has not been paid it may still be recovered by way of securities. A con- sideration of reg. 188 shows that it deals not with the collection of revenue, but with the collection of an additional and different sum, and that cannot be justified on any view of the matter. The carrying out of a policy which does not appear on the face of the Act is right outside the regulation-making power. That power is to carry out the Act which has in fact been promulgated, and that in fact is a taxation Act, or a revenue Act, an Act intended to raise revenue, and not to avoid raising revenue. There is not one thing in the Act to suggest that the authorities administering the Excise Act are in the slightest bit concerned whether goods are exported or delivered for home consumption. They are concerned with collecting the appropriate taxes in circumstances where goods go into home consumption. As to what is to happen to goods until duties are paid or goods are exported the Act itself makes quite detailed provisions, but they are all designed not for the purpose of securing the exportation of goods which have been entered for exportation, but for the purpose of securing the revenue on goods until they are exported. The proposition in Gibson V. Mitchell 2 was entirely different from the proposition in this case.

Cur. adv. vult. The Court delivered the following written judgment :- This is a demurrer which, taking advantage of Order XXIV., r. 1, demurs to part of a statement of claim setting up a distinct cause of action. The action is brought by the Collector of Customs for

1(1938) 60 C.L.R. 97. 2(1928) 41 C.L.R., at p. 278. 83 CLR 409

New South Wales and the cause of action in question depends upon reg. 188 of the Excise Regulations 1925 as amended. Regula- tion 188 is headed "Excisable Goods in Course of Removal. Responsibility for Safe Keeping". The relevant part of the statement of claim alleges that the defendant had the control and custody of certain excisable goods, namely, certain tobacco, cigarettes and cigarette papers, pending exportation of the goods to parts beyond the seas, and was responsible for the safe keeping of the goods while the same were in its custody and control. The pleading proceeds to allege that the defendant failed to keep safely the goods referred to, whereupon by reason of reg. 188 the defendant became liable to pay to the plaintiff an amount equal to the excise duty thereon. The amount of the excise duty payable on the goods is alleged to be £1,324 2s. 5d. In respect of the cause of action in question the plaintiff sought to recover this sum.

The ground of the demurrer is that reg. 188 is invalid. The regulation is in the following terms:- (1) Every person who has the control or custody of excisable goods, while such goods are in course of removal, or are in transit coastwise, or are in or at an approved place, or until delivery for home consumption or exporta- tion to parts beyond the seas, shall be responsible for the safe keeping of such goods while they are in his control or custody, and shall account for such goods to the satisfaction of the Collector. (2) If any person fails to comply with his obligations under this regulation, he shall be liable to pay to the Collector an amount equal to the duty on the excisable goods not safely kept or not accounted for to the satisfaction of the Collector. (3) This regula- tion shall not affect the liability of any person arising under the Excise Act 1901-1923, or any security purporting to have been given in pursuance thereof, or of the Excise Act 1901. (4) Any sum payable to the Collector under this regulation may be sued for by action in any civil court having jurisdiction to entertain suits for debts to the amount claimed, as if it were a debt due by the defendant to the Collector. (5) In any action under this regulation, the statements or averments of the Collector in his claim or declaration shall be prima facie evidence of the matter or matters stated or averred."

The question of the validity of the regulation depends upon the statutory power in pursuance of which it was adopted by the Governor-General in Council. That power is found in S. 164 of the Excise Act 1901-1949. The section is expressed as follows The Governor-General may make regulations not inconsistent with

83 CLR 410

OF A. this Act prescribing all matters which by this Act are required or

permitted to be prescribed or as may be necessary or convenient to be prescribed for giving effect to this Act or for the conduct of any business relating to the Excise."

There is no provision in the Act prescribing any matter or expressly permitting any matter to be prescribed to which the regulation would be relevant. The validity of the regulation, therefore, depends upon the words all matters be necessary or convenient to be prescribed for giving effect to this Act or for the conduct of any business relating to the Excise

A statutory power of this description has been considered by this Court in Carbines v. Powell 1; Gibson v. Mitchell 2 Broad- casting Co. of Australia Pty. Ltd. v. The Commonwealth 3.

A power expressed in such terms to make regulations enables the Governor-General in Council to make regulations incidental to the administration of the Act. Regulations may be adopted for the more effective administration of the provisions actually con- tained in the Act, but not regulations which vary or depart from the positive provisions made by the Act or regulations which go outside the field of operation which the Act marks out for itself. The ambit of the power must be ascertained by the character of the statute and the nature of the provisions it contains. An important consideration is the degree to which the legislature has disclosed an intention of dealing with the subject with which the statute is concerned.

In an Act of Parliament which lays down only the main outlines of policy and indicates an intention of leaving it to the Governor- General to work out that policy by specific regulation, a power to make regulations may have a wide ambit. Its ambit may be very different in an Act of Parliament which deals specifically and in detail with the subject matter to which the statute is addressed. In the case of a statute of the latter kind an incidental power of the description contained in S. 164 cannot be supposed to express an intention that the Governor-General should deal with the same matters in another way.

Part VI. of the Excise Act 1901 1949 relates to the payment of duty, the removal of excisable goods from factories, and excise control. Section 54, which is the first section in Part VI., makes the manufacturer liable to pay to the collector the excise duties on all excisable goods manufactured by him. Section 161 makes excise duties Crown debts charged upon the goods in respect of

1(1925) 36 C.L.R. 88. 2(1928) 41 C.L.R. 275. 3(1935) 52 C.L.R. 52. 83 CLR 411

which the same are payable and makes them payable by the owner of the goods and recoverable at any time in any court of competent jurisdiction by proceedings in the name of the collector. Under S. 56 no excisable goods shall be removed from the factory without an entry made and passed authorizing their removal. Section 58 provides that entries may be made by the manufacturer or owner and passed by an officer and may authorize the removal of excisable goods for (a) home consumption, (b) removal to an approved place, (c) exportation. In the case of entry for home consumption, S. 59 requires that the excise duty shall be paid before the entry is passed. Under S. 60 the manufacturer must give security for the due removal or exportation of the excisable goods before any entry is passed for the removal of the excisable goods to an approved place or for exportation. By S. 16 the Customs are given a right to require and take securities for compliance with the Excise Acts and generally for the protection of the revenue. Pending the giving of the required security in relation to any goods subject to the control of the Customs, the Customs may refuse to deliver the goods or pass any entry relating thereto. The security may at the discretion of the collector be by bond or guarantee or cash deposit or all or any of those methods and it may cover all transactions for such time or such amount as the Comp- troller may approve SS. 17 and 18. By S. 61 all excisable goods manufactured are, until delivery for home consumption or exporta- tion to parts beyond the seas, to be subject to the control of the customs; they may not be removed, altered or interfered with except by authority and in accordance with the Act.

The defendant, in attacking the validity of reg. 188, gave it a construction which the plaintiff declined to place upon it. Accord- ing to that construction reg. 188 imposed upon the custodian of the goods for the time being, if they were lost, destroyed or dis- appeared, an obligation to pay not the excise duty on the goods, but a sum of money of equal amount, SO that the payment did not discharge the obligation of the manufacturer and the owner of the goods in respect of excise but left that liability outstanding. According to this construction reg. 188 would operate as a sanction and not simply as a means of recovering the duty charged on the goods by S. 161 which the statute made payable by the owner or the manufacturer. In support of this construction the defendant laid emphasis on the words " an amount equal to the duty' in sub-reg. (2) and upon sub-reg. (3).

But, according to the construction given to the regulation by the plaintiff, the purpose of the regulation is to obtain from the

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person who has control or custody of excisable goods which are

destroyed, lost or disappear, the amount of the duty payable in respect of those goods.

No doubt this latter construction makes it somewhat less difficult to support the regulation and accords better with what might be supposed to be its substantial object. But it is unneces- sary to decide between the two contentions, for, even accepting the construction given to the regulation by the plaintiff, it goes beyond the statutory power conferred by S. 164.

The Excise Act 1901-1949 has given specific attention to the question who shall be liable to pay excise duty and to the mode in which the excise duty shall be recovered and the occasion upon which it shall be paid in the case of entry for consumption. It has given attention to the question of security for due removal and exportation and it has made specific provision in relation to these matters. The purpose of reg. 188 is to impose a liability in the events which it specifies upon another set of persons. It is a distinct and independent addition of liability to the liabilities which the legislature has provided. The liability for the safe keeping of the goods and to account for the goods to the satis- faction of the Collector falls on each person who in the course of or after the removal of the goods has control or custody thereof, and it would include carriers, warehousemen, wharfingers and perhaps stevedores. It is an important liability and to impose it marks a new step in policy. The regulation is something which is far more than incidental to the provisions of the Act or to its more effective administration. Regulation 188 is beyond the power conferred by S. 164 and is therefore void.

The demurrer should be allowed with costs.

Demurrer allowed with costs. Solicitor for the plaintiff, D. D. Bell, Crown Solicitor for the Commonwealth.

Solicitors for the defendant, Norton, Smith &Co.