Ritter v Godfrey

[1922] HCA 62

31 CLR 421

THE COMMONWEALTH AND THE CENTRAL

WOOL COMMITTEE

THE COLONIAL COMBING, SPINNING AND

WEAVING COMPANY LIMITED Constitutional Law-Powers of Commonwealth Government-Executive power-

Power to contract-Granting of licence-Consent to sell wool tops-Taxation-- ConsiderationAppropriation of public revenue-Authority under statute of Commonwealth Parliament--Responsibility of Ministers to Parliament--Com- monwealth of Australia Constitution Act (63 &64 Vict. c. 12), sec. V.--The Constitution, secs. 2, 53, 55, 61, 64, 81-War Precautions Act 1914-1916 (No. MELBOURNE, 10 of 1914-No. 3 of 1916), sec. 4-War Precautions (Wool) Regulations 1916 Oct. 10-12; (Statutory Rules 1916, No. 322), reg. 10-Bill of Rights (1 W. &M., sess. 2, Nov. 8-10. e. 2).

During the continuance of the War and after the making of the War Pre- cautions (Wool) Regulations 1916 and the War Precautions (Sheepskins) Regu- agreements with a company, which was engaged in the manufacture within the Commonwealth and the sale of wool tops, each of which agreements was either an agreement to give consent to a sale of wool tops by the company in return for a share of the profits of the transaction (which was called by the parties a " licence fee "), or an agreement that the business of manufacturing wool tops should be carried on by the company as agent for the Commonwealth in consideration of the company receiving an annual sum from the Common- wealth, or a combination of both these agreements.

Held, by Knox C.J., Isaacs, Higgins, Gavan Duffy and Starke JJ., that, apart from any authority conferred by an Act of the Parliament of the Com- monwealth or by regulations thereunder, the Executive Government of the Commonwealth had no power to make or ratify any of the agreements.

Held, also, by Isaacs, Higgins and Gavan Duffy JJ., that neither the War Precautions (Wool) Regulations 1916 nor the War Precautions Act 1914-1916, under which those regulations were made, conferred any authority for the making of any of the agreements.

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Attorney-General 1. Wills United Dairies Ltd., (1922) 91 L.J. K.B., 897; 127 L.T., 822; 38 T.L.R., 781, followed.

Per Isaacs J.:-(1) Sec. 61 of the Constitution. by its declaration that the executive power of the Commonwealth

extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth, COMBING,

definitely delimits constitutionally the King's executive power as between Commonwealth and States, but the validity of any executive act of the Com- monwealth within the defined limits is not thereby determined: it depends on whether the act is warranted by law. (2) The agreements, SO far as they purported to bind the company to pay to the Government money as the price of consents, were taxation, and without parliamentary authority were void on the principle of Attorney-General v. Wilts United Dairies Ltd., (1922) 91 L.J. K.B., 897; 127 L.T., 822; 38 T.L.R., 781. (3) So far as any agreement pur- ported to bind the Government to pay to the company a remuneration for manufacturing wool tops, it was an appropriation of public revenue, and, being without legislative authority, was void on the principle of Mackay v. Attorney General for British Columbia, (1922) I A.C., 457. (4) The constitutional rule of parliamentary practice, that Ministers are responsible to Parliament, gives rise to the general understanding, of which the Courts must take judicial notice as a legal element of contract, that Parliament is not to be fettered in its dis- cretion as to public expenditure by executive action, and that therefore no contract is valid which involves the payment of public moneys by Government unless Parliament has sanctioned it by direct legislation or by appropriation

QUESTION RESERVED.

An action was brought in the High Court by the Commonwealth and the Central Wool Committee against the Colonial Combing, Spinning and Weaving Co. Ltd., a company incorporated and carry- ing on business in Australia, to recover damages arising out of the breach by the defendant of certain contractual relations alleged to have been created between the parties by three agreements of 1st March 1917, 5th and 19th January 1918, and 26th September 1918, respectively. A cross-action was brought by the defendant against the plaintiffs to recover damages for the breach by the plaintiffs of the agreement of 1st March 1917, which the defendant alleged had remained unaltered.

The agreement of 1st March 1917 (exhibit P452) purported to be made between the Government of the Commonwealth and the defendant Company, and was executed by the Prime Minister of the Commonwealth "for and on behalf of and SO as to bind the Govern- ment of the Commonwealth and not SO as to incur any personal

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liability 22 and by the Company. So far as material the agreement was as follows :--------

Whereas under the powers conferred upon him by the War Precautions Act 1914-1916 His Excellency the Governor-General acting with the advice of the Federal Executive Council has made certain regulations known as the War Precautions (Sheepskins) Regulations and the War Precautions (Wool) Regulations regulating inter alia the conditions under which sheepskins and wool may be sold and purchased in Australia And whereas the Company being engaged inter alia in the manufacture and sale of wool tops and being controlled under the said War Precautions Act 1914-1916 and the said recited regulations to the extent set forth in this agreement has entered into and desires to extend and vary contracts and to enter into further contracts for the sale of wool tops to markets hitherto supplied by it And whereas it is necessary under the said regulations for the Company to obtain the consent of the Common- wealth Government to the purchase of such sheepskins and wool as it may require for the manufacture of wool tops And whereas the Commonwealth Government has approved that resultant wool (from fellmongered sheepskins) submitted by the Company for appraise- ment shall rank and share in all advantages given by participation in a certain pool called the ' wool pool' formed in connection with the purchase by the Imperial Government of the Australian wool clip And whereas the Central Wool Committee constituted by the said regulations has recommended the Government of the Common- wealth of Australia to execute these presents for the considerations hereinafter set forth the Commonwealth Government has agreed to consent to the purchase of sheepskins and wool by the Company for the purpose of manufacturing wool tops and for the purpose of holding normal reserves of stocks of sheepskins and wool (having regard to the fact that additional combing machinery is about to be installed) and has also agreed to consent to the sale by the Company of wool tops under the conditions hereinafter set forth and in consideration thereof the Company has agreed to make the payments and conform to the conditions herein- after set forth Now this agreement witnesseth as follows: -

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and the purchase by the Company of such wool as may be required

by the Company for the following purposes and for no other pur- poses (a) the purpose of manufacturing wool tops to fulfil any contracts for the sale of wool tops which have been made or extended by the Company prior to the date of these presents or which may COMBING,

with the previous consent in writing of the Commonwealth Govern- ment be made or extended after the date of these presents, (b) the purpose of holding the Company's normal reserve of stocks having due regard for any increase in wool combing plant and machinery. Any wool SO purchased by the Company and found to be not suitable for the manufacture of wool tops shall be appraised and rank and share in all advantages given by participation in the said recited wool pool but the quantity thereof shall not exceed twenty per centum of the total wool purchased. (2) The Commonwealth Government hereby consents to the sale to and the purchase by the Company of such sheepskins green or dry as may be required by the Company and to the use by the Company of SO much of the resultant product after the sheepskins have been fellmongered as may be suitable for the manufacture of tops. Any resultant wool product or products from such sheepskins not suitable for the manufacturer of the wool tops shall be appraised and rank and share in all advantages given by participation in the said recited wool pool. (3) The Common- wealth Government hereby approves of the Company dealing in any manner it thinks best with the noils and other by-products of the manufacture of wool tops but the Company shall not sell for export to other countries than Great Britain or her allies without first obtaining the consent of the Commonwealth Government. (4) The Commonwealth Government hereby agrees that it will upon request by the Company give its consent to the sale by the Company of the following wool tops and no others, namely, any wool tops which the Company has contracted to sell by contract made or extended prior to the date of these presents and any wool tops which the Company shall with the previous consent in writing of the Common- wealth Government contract to sell by contract or contracts made or extended after the date of these presents. (5) For all wool pur- chased by the Company pursuant to the consent contained in clause 1 hereof the Company shall pay to the vendor the full appraised

31 CLR 425

price fixed in accordance with the said regulations. In the event H. C. OF of the appraised prices for all wool throughout the Commonwealth for the season 1916-1917 being in the opinion of the Commonwealth Government less than a parity of 151d. per pound of greasy wool then the Company will forthwith after being required by the Common- wealth Government SO to do pay to the Commonwealth Govern- ment such additional sum as shall be fixed by the Commonwealth Government as the amount necessary to make the price to the vendor equal to a parity of 151d. per pound of greasy wool. The Company shall be entitled to make it a condition of its contract of purchase of wool that in the event of the appraised price for all wool throughout the Commonwealth for the season 1916-1917 being in the opinion of the Commonwealth Government more than a parity of 151d. per pound of greasy wool then the Company shall be repaid by the vendor such an amount as will reduce the amount paid by it to a parity of 15}d. per pound of greasy wool. (6) For the purpose of this agreement the net earnings of the Company shall be ascertained at the end of each accounting period of the Company by deducting from the gross earnings of the Company from all sources all proper allowances for or as a reserve against amortiza- tion of leaseholds depreciation of plant and machinery interest ordinary business losses and all other expenses and outgoings of and incidental to the Company's business (other than any payment of the war-time profits tax referred to in clause 8 hereof) and such further allowance for amortization of plant and machinery purchased at war prices as will reduce the book value of such plant and machinery to the pre-war value of plant and machinery of the same kind. The first accounting period of the Company for the purposes of this agreement shall commence on the first day of March one thousand nine hundred and seventeen (that being the date of com- mencement of manufacture of tops hereunder) and shall continue to the end of the full ordinary accounting period of the Company then current, The net earnings for such first accounting period shall be deemed to be an amount bearing the same proportion to the net earnings for such full ordinary accounting period as the number of working days in the first accounting period hereunder bears to the number of working days in such full ordinary accounting

31 CLR 426

period. (7) The net earnings of the Company for each accounting

period during the continuance of this agreement (after being ascer- tained in the manner set forth in clause 6 of these presents) shall be applied by the Company as follows, that is to say, the Company shall (i.) hold one-half of the net earnings at disposal of the Commonwealth Government and (ii.) subject as hereinafter provided retain the balance for its own purposes. (8) If the earnings of the Company in any accounting period during the continuance of the agreement shall become taxable under any special taxation imposed by the Parliament of the Commonwealth on profits earned in war time then the Commonwealth Government shall refund to the Company an amount equal to one-half of the war-time profits tax which shall be payable or shall have been paid by the Company in respect of such accounting period. And if in any accounting period the amount SO to be refunded when added to the amount retained by the Company (after payment of the war-time profits tax) makes a sum less than one-third of the total net earnings for that period then the Commonwealth Government will also refund to the Company such further amount as shall be sufficient to make the total sum to be retained by the Company equal to one-third of the total net earnings for the period. (9) During the continuance of this agreement the Company shall not distribute amongst its shareholders any of the net earnings of the Company by way of dividend bonus or otherwise but shall reinvest such earnings in the extension of the plant and machinery of the business and of the business other than the accumulation of money. (10) Every amount which under clause 7 of these presents the Company has agreed to hold at the disposal of the Commonwealth Government shall forth- with after the end of the accounting period of the Company in respect of which the earnings were brought into account be paid by the Company into a special account at a bank approved by the Commonwealth Government in writing for that purpose and such account shall be called the 'Wool Top Manufacturers' Account. No sum shall be withdrawn from the said account without the con- sent in writing of the Commonwealth Government and all moneys paid into the said account shall at all times be disposed of as the Commonwealth Government shall direct.

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herein contained shall constitute or be construed to constitute any partnership between the Company and the Commonwealth Govern- ment. (14) If the Company shall liquidate or change its constitution or shall not punctually perform all its obligations to its creditors SO that any of them shall be legally justified in seizing or obtaining judgment and execution or taking possession of any of its assets or appointing a receiver then this agreement shall ipso facto be ter- minable at the option of the Commonwealth Government. (16) The Company shall enter into a bond with an approved surety in the sum of ten thousand pounds for the due and faithful obser- vance and performance of all and singular the matters and things to be observed and performed by the Company under this agree- ment. (17) Any consent notice nomination or other communica- tion by the Commonwealth Government to the Company shall be deemed to be duly given made and served if signed on behalf of the Commonwealth Government by John Michael Higgins the Chairman of the Central Wool Committee constituted by the said regulations and posted by prepaid post addressed to the Company at the address hereinbefore set forth."

The agreement of 5th and 19th January 1918 was contained in or implied from two telegrams of those dates (exhibits P80 and P101) sent by the Chairman of the Central Wool Committee to Frederick William Hughes, the managing director of the Company. The material portions of these telegrams were as follows :-

5th January- As regards current output when prices have been fixed by the parties proceeds to be dealt with, first, as per terms and conditions of expired contract, secondly, that all moneys raised over and above the rate per pound of tops stipulated in the old contract (the agreement of 1st March 1917) to be paid into a trust account with the sub-committee of the Central Wool Committee on completion of each shipment and such money to be dealt with as the sub- committee may decide taking into account special conditions and increased cost of manufacture if any." 19th January- As regards current output when prices have been fixed by the parties proceeds to be dealt with, firstly, as per terms and conditions of expired con- tract, secondly, that on the completion of each shipment all money raised over and above the rate per pound of tops stipulated in the

31 CLR 428

A. old contract to be paid (a) to the credit of a trust account with the

sub-committee of the Central Wool Committee or (b) endorsed store warrants on wool or (c) approved bonds of equal value deposited with the sub-committee of the Central Wool Committee and such money or store warrants or bonds to be dealt with as the sub- COMBING,

committee may decide taking into account special conditions and increased cost of manufacture if any."

The agreement of 26th September 1918 was contained in a memo- randum of that date of a conference at the Prime Minister's Depart- ment (exhibit P299), the material portion of which was as follows:--

"New agreement to be drawn between the Commonwealth Government and the Company based upon the following principles -(1) Term to be subject to six months' notice on either side, such notice to operate as from the termination of any accountancy period. This agreement to date from 1st September 1918. (2) Back pay- ments due by Company to Government to be immediately made on the basis of the expired contract plus the full excess over basis of 72d. per pound. (3) The second and third accountancy periods to be on an identical basis as to money payments. (4) Re taxation under old agreements and modifications thereof the Company is to be assured by the Treasury of a minimum of one-third of profits up to 72d. per pound; over that rate Company is not to be obliged to pay the difference twice (that is, in form of taxation and licence fee). (5) For the purpose of the new agreement the following conditions shall apply :-(a) For the future the Company is to use appraised wool only for the manufacture of tops. (b) The Company shall declare the amount of their shareholder's funds, inclusive of amount of accumulated profits and reserves, the total amount of which must be maintained throughout the period of the agreement. (c) The Company may borrow for business purposes from any bank at normal rates of interest. (d) The wool, wool tops, noils, waste, &., manu- factured by the Company under this agreement and in possession of the Company shall be deemed to be the property of the Govern- ment, but the Central Wool Committee for the purposes of this agreement will, if necessary, arrange facilities for financing the stocks carried by the Company at normal rates of interest (insurable) interest on any stocks to be subsequently determined. (e) The

31 CLR 429

Company will be the owner of its property, plant and general busi- H. ness, but the work of making wool tops is to be undertaken as agents for the Government. (f) Amortization of plant, &., and depre- ciation are to be as allowed by the Commissioner under the War- time Profits Tax Act and Income Tax Act respectively. (g) The Central Wool Committee is to be empowered to appoint a resident inspector whose duty it will be to report to the Central Wool Com- mittee as directed by it. The inspector shall have no power to inter- fere with or direct the operations of the Company. (h) The Central Wool Committee is also to be empowered to appoint an auditor with full powers of inspection and report. (i) Both inspector and auditor are to be responsible to the Central Wool Committee alone. (j) If the Company objects to the nomination of either officer appeal may be made to the Prime Minister whose decision shall be final. (k) The Company shall furnish balance-sheets within six weeks from the end of each accountancy period. (1) The Company is to have the right to sell its business to any responsible person or com- pany by consent of the Central Wool Committee. Power of refusal of consent is not to be unreasonably exercised. (m) The Company is as far as practicable to manufacture during the first accountancy period under the new agreement wool tops at the rate of six million pounds weight per annum. (n) The Company is to receive as remuneration over all costs of manufacture a sum of £64,000 per annum (free of war-time profits taxation at present rates) based on a six million pounds output of wool tops, but, as the Government is not prepared to grant the Company immunity from payment of war-time profits tax, the payments are to be expressed (after dis- cussion with representatives of the Central Wool Committee) in the terms of a poundage payment on a tapered rate or otherwise, as the circumstances may demand. In order that this arrangement may be practicable without the poundage rate rising above 4}d. per pound at any point the Company is to increase its ratio of shareholders' capital to debenture and other borrowed money. (o) As it is not anticipated that the Company will be able during the first accountancy period to output more than six million pounds weight of wool tops, the question of payment for any excess over six million will have to be subsequently discussed and determined."

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The action was heard before Isaacs J., who, after hearing evidence, made certain findings of fact; and he reserved for the consideration of the Full Court of the High Court the question "how consistently with the facts as found by me judgment should, having regard to the amended pleadings and particulars thereunder and the evidence as appears from the transcript of proceedings at the trial and the exhibits, be entered with respect to the several claims made in the action and the cross-action respectively."

The following questions arising out of the reservation were directed to be argued before the Full Bench, and were argued before Knox C.J., Isaacs, Higgins, Gavan Duffy, Powers and Starke JJ. -

A.-Is the War Precautions Act a law imposing taxation within

the meaning of sec. 55 of the Constitution, assuming that the agreements of March and January were within the powers conferred on the Commonwealth by the Wool Regulations ? B.-(1) Was it within the legal power of the Commonwealth Execu-

tive Government apart from any Act of the Parliament or regulation thereunder to make or ratify at the times the same were respectively made or ratified any and which of the following agreements (a) 1st March 1917; (b) January 1918; (c) September 1918, consisting of pars. 2, 3 and 4 of exhibit P299, treating such paragraphs as separable from the rest of the provisions of that document; (d) Sep- tember 1918, consisting of the terms of exhibit P299 disregarding pars. 2, 3 and 4 thereof; (e) September 1918, regarding exhibit P299 as a whole ? (2) If yes as to any of the said agreements, was the approval

of the Governor-General in Council necessary to the making or ratification thereof ? Ultimately the Full Bench found a decision upon question A unnecessary.

The other questions arising out of the reservation were argued before Isaacs, Higgins and Gavan Duffy JJ.

Owen Dixon K.C. and E. M. Mitchell (with them Russell Martin), for the plaintiffs.

31 CLR 431

Sir Edward Mitchell K.C. and Maughan K.C. (with them Weston). H C. OF for the defendant.

Cur. adv. rult. Upon the questions argued before the FULL BENCH the following written judgments were delivered

Knox C.J. AND GAVAN DUFFY J. The first question for our con- sideration is set out thus: " (1) Was it within the legal power of the Commonwealth Executive Government apart from any Act of the Parliament or regulation thereunder to make or ratify at the times the same were respectively made or ratified any and which of the following agreements (a) 1st March 1917 (b) January 1918; (c) September 1918, consisting of pars. 2, 3 and 4 of exhibit P299, treating such paragraphs as separable from the rest of the provisions of that document (d) September 1918, consisting of the terms of exhibit P299 disregarding pars. 2, 3 and 4 thereof (e) September 1918, regarding exhibit P299 as a whole ? "

In our opinion the answer to this question depends on the meaning of sec. 61 of the Constitution, which is as follows " 61. The execu- tive power of the Commonwealth is vested in the Queen and is exercisable by the Governor-General as the Queen's representative, and extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth." The section has three distinct functions it vests the executive power of the Common- wealth in the Sovereign. it enables that power to be exercised by the Governor-General as the Sovereign's representative, and it delimits the area of that power by declaring that it extends to the execution and maintenance of the Constitution and of the laws of the Commonwealth. The phrase " the laws of the Commonwealth" is found in sec. v. of the Commonwealth of Australia Constitution Act and in various places in the Constitution itself. In every case it probably means Acts of the Parliament of the Commonwealth. These enactments are described in sec. v. of the covering Act as

laws made by the Parliament of the Commonwealth under the Constitution." and throughout Part v. of Chapter I. of the Con- stitution, which confers and delimits the legislative power of the

31 CLR 432

Commonwealth, they are called simply laws." But whatever may

be the meaning of the expression elsewhere, its collocation with the words "this Constitution" in sec. 61 leaves no room for doubt as to its meaning there. These words would be wholly unnecessary if the phrase the laws of the Commonwealth " meant more than the COMBING,

laws made by the Parliament of the Commonwealth, for the phrase would then include the Constitution itself. In our opinion, an act not authorized by sec. 61 is not within the legal power of the Com- monwealth Executive Government, and, even if done by the Sovereign or by the Governor-General, must invoke some authority other than the Constitution. In this case we must assume that the various agreements were not mediately or immediately authorized by any Act of the Parliament. There remains only to consider whether any of them can properly be described as made in the execution or maintenance of the Constitution itself. Each of the agreements is either an agreement to give consent to a sale of wool tops by the owner in return for a share of the profits of the transaction, called by the parties to the agreement a "licence fee," or an agreement that the business of manufacturing wool tops shall be carried on by the defendant Company as agent for the Commonwealth in considera- tion of receiving an annual stipend from the Commonwealth. or a combination of both of these agreements. It is clear that none of these agreements is made in maintenance of the Constitution, and in our opinion it is equally clear that none is made in the execution of the Constitution, because none of them is prescribed or even author- ized by the Constitution itself, and execution of the Constitution means the doing of something immediately prescribed or authorized by the Constitution without the intervention of Federal legislation. It is true that sec. 64 of the Constitution directs that the Sovereign through his Ministers shall administer such departments of State as the Governor-General in Council may establish, and they would probably be authorized to make such contracts on behalf of the Commonwealth as might from time to time be necessary in the course of such administration; but it is not pretended that the con- tracts now in question come within that category. If and so far as they were not made under the authority of Commonwealth legis- lation, they were made by or under the direction of the Prime Minister

31 CLR 433

or the Acting Prime Minister while engaged in carrying out the OF A. political policy of the Government and as incidental and ancillary to that policy. (See John Cooke &Co. Proprietary Ltd. and Field V. The Commonwealth and the Central Wool Committee (1). )

If, for reasons we have stated, the Commonwealth could not make these agreements, it could not ratify them.

We think that we should answer "No" to the first question, and therefore make no answer to the second question.

ISAACS J. The first question has given rise to problems of high constitutional importance. It is whether it was within the legal power of the Commonwealth Executive Government, apart from any Act of the Parliament or regulation thereunder, to make or ratify, at the times they were made or ratified, certain agreements. The question, it will be observed, does not concern itself with mode or form. It is not how or by what special functionary the authority, if any, of the Government must be exercised. It is whether, assum- ing the most formal executive act imaginable by the proper func- tionary, the agreements referred to could, by virtue only of the common law prerogative, be validly made or ratified at the times they were respectively in fact made or ratified ?

I may at once state succinctly the conclusions at which I have arrived. In my opinion, unless authorized by some Commonwealth legislation the Executive Government would have no power to make any of the agreements. The final ground of my opinion, broadly stated, is that the law of the Constitution with respect to public finance prohibits such bargains.

With respect to the first three agreements, the vitiating cause is that, however formally expressed and however their constitutional effect may be disguised, they amount at bedrock to "taxation" of the individual; and, without parliamentary warrant, that is for- bidden ground. Partly anticipating my reasons given later, I may quote a passage from a judgment of Lord Parker (then Parker J.) in Bowles v. Bank of England (2), a passage which exemplifies this to a very remarkable degree. He said By the statute 1 W. &M., usually known as the Bill of Rights, it was finally settled that

(2) (1913) 1 Ch., 57, at pp. 84-85.

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there could be no taxation in this country except under authority of an Act of Parliament. The Bill of Rights still remains unrepealed, and no practice or custom, however prolonged, or however acquiesced in on the part of the subject, can be relied on by the Crown as justifying any infringement of its provisions. It follows that, with regard to the powers of the Crown to levy taxation, no resolution, either of the Committee for Ways and Means or of the House itself, has any legal effect whatever. Such resolutions are necessitated by a parliamentary procedure adopted with a view to the protection of the subject against the hasty imposition of taxes, and it would be strange to find them relied on as justifying the Crown in levying a tax before such tax is actually imposed by Act of Parliament."

A fortiori is the present case, where there has not been even a resolu- tion of either House to support the claim.

Regarding the fourth agreement, as I construe it, it is not taxa- tion " but it brings into action the correlative financial principle of the Constitution, namely, the control of the public expenditure by parliamentary "appropriation." That agreement binds the Government to pay £64,000 a year to the Company out of the public funds, and, as I read the law as expounded by the Privy Council, that is equally forbidden without parliamentary authority.

But, clear as the conclusions appear when once they are reached, the considerations that meet us on the way are SO various and so important that they need close statement and attention, for the parliamentary guardianship of taxation and expenditure is the pivot of the Constitution and the keystone of the arch of personal liberty.

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the regulations desired to carry on its business, and that the con- H C. sent of the Commonwealth Government to the purchase of sheep- skins and wool was necessary under the regulations, and that for the considerations thereinafter set forth the Government had agreed to consent to the purchase of sheepskins and wool and had also agreed to consent to the sale of wool tops under the con- ditions set forth, and in consideration thereof the Company had agreed to make the payments thereinafter mentioned, the agreement goes on to provide various stipulations on the part of the Common- wealth Government, including par. 4 in these words: "The Com- monwealth Government hereby agrees that it will upon request by the Company give its consent to the sale by the Company of the following wool tops and no others, namely, any wool tops which the Company has contracted to sell by contract made or extended prior to the date of these presents and any wool tops which the Company shall with the previous consent in writing of the Com- monwealth Government contract to sell by contract or contracts made or extended after the date of these presents." Then the Company in consideration for the stipulations of the Government agreed that it will, inter alia, pay to the Government one-half its net earnings during the continuance of the agreement and subject to a promise on the part of the Government that, if the Company's share of the profits be reduced to less than one-third by taxation, the Commonwealth Government will refund sufficient of the Govern- ment's contractual share to make up the full one-third to the Com- pany. There were no property rights in the Government to be protected or transferred by the consent.

(b) The agreement of January 1918.-This was merely a modifi- cation of the first agreement by allotting to the Government, in consideration of further consents, such part of the prices obtained for wool tops as were in excess of 72d. per lb. as the sub-committee decided should be SO allotted, and the net earnings up to 72d. per lb. being regulated by the original agreement. The sub-committee in fact allotted to the Government the whole of the excess over 72d. down to 28th February 1918.

(c) The agreement of 27th September 1918.-As to pars. 2, 3 and 4 of

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A exhibit P299, taken separately, this was an agreement that the agree-

ment of January 1918 and the decision of the sub-committee should be carried out and extended to 31st August 1918, the Government giving a new stipulation, namely, a promise to give a Treasury assurance that the Company would not be required to pay any moneys twice, namely, both as war-time profits tax, and as excess profits under the new agreement. And further, this agreement was required by the Government as a condition, and was in fact entered into by the Company because the Government insisted on it as a condition of entertaining the question of the terms upon which future consents to sell wool tops would be given.

(d) The September 1918 agreement, apart from back payments.- This was a bargain of a different character. It was an agreement by which, in effect, the Company, while it retained ownership and possession of its business and factory and plant and general pro- perty, agreed that it would in future manufacture all wool tops, not for itself, but on behalf of the Government, and that all wool and wool tops, &., manufactured and in its possession were to be deemed the property of the Government. The Central Wool Com- mittee were to arrange necessary financial facilities, and the Govern- ment undertook to pay the Company, by way of remuneration at the rate of £64,000 a year on a basis of 6,000,000 lbs. of wool tops per annum, a poundage rate to be ascertained to provide that sum. This sum of £64,000 per annum was not to be paid out of the profits -indeed the promise to pay that sum stood independently of any profits at all. There might even be a loss on the sale of the wool tops manufactured, yet the sum of £64,000 as the basis mentioned was inalterable. It was a direct liability of the Government out of its own funds. These agreements were in fact ratified, as far as ministerial action could ratify them, and leaving aside the legal effect of the mode and the competency of the functionaries by which the de facto ratification took place at various times during the War, that is, before the royal proclamation of peace.

The question is as to the legal power which the Commonwealth Executive Government had-apart from Commonwealth legisla- tion, which has to be considered in a separate judgment by the

31 CLR 437

Court differently constituted-to make or ratify any of these agree- ments. The arguments have covered many points of great interest and importance; and some of these, at all events, must be dealt with even if only for the purpose of disengaging them from the essentials of the problem.

(2) Sources of Executive Power.--There are, apart from Common- wealth legislation, only two possible sources of executive power to make these agreements: (1) Imperial statute law, other than the Constitution Act; (2) authority derived from the Constitution itself, by reason of what it says or imports. As to Imperial legislation- other than the Constitution Act-there is none relevant. None has been suggested which confers on the Commonwealth Government any executive authority beyond that contained in the Constitution. Chapter II. of the Constitution is headed 'The Executive Govern- ment." Sec. 61 makes three declarations as to the executive power of the Commonwealth. Observe, it is not as to the Executive Government of the Commonwealth or as to the powers of the Govern- ment, but as to the "executive power of the Commonwealth." As to that "power," it declares that it (a) is vested in the Sovereign, (b) is exerciseable by the Governor-General as the Sovereign's representative, (c) " extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth." The reference to the Governor-General as the representative of the Sovereign must be read with sec. 2 of the Constitution, which con- stitutes him such representative. As to the first declaration it is a renewed statement of the law and introductory of what follows. Blackstone (vol. I., p. 190) says "The Supreme executive power of these Kingdoms is vested by our laws in a single person, the King or Queen," In Halsbury's Laws of England (vol. VI., p. 318) it is said 'The executive authority is vested in the Crown as part of the prerogative." The second declaration need not be further considered now. The third is very important. It marks the external boundaries of the Commonwealth executive power, SO far as that is conferred by the Constitution, but it leaves entirely un- touched the definition of that power and its ascertainment in any given instance. It no more solves the difficulty in the present case than would the words for the peace welfare and good government

31 CLR 438

of New South Wales or the words 'in and for Victoria solve a

similar difficulty in relation to the constitutional executive authority of those States. But the third declaration is an essential starting- point, and the extent it marks out cannot be exceeded. The argu- COMBING,

ment upon those words included various contentions; as, for instance, that the executive authority of the Commonwealth Government embraced all the common law powers of the Imperial Government, and that "laws of the Commonwealth included the common law- that once find a given subject matter within the ambit of the Con- stitution the legal power to make the agreement existed, and, what

I regard as very crucial, though I do not agree with it, that the written words of the Constitution applied to sec. 61 form the only necessary solving test. These contentions convince me that the proper construction of the enactment requires a deeper considera- tion than I should have otherwise thought necessary. Sec. 61, when carefully examined, simply applies to the new constitutional structure, the Commonwealth, but with the necessary adaptation, the basic principle of the law of the Empire that the King is indis- tinguishably the King of the whole Empire, but that the springs of royal action differ with locality. Where responsible government exists, it is an axiom of the public life of the British Commonwealth of Nations that the King's agents to regulate the exercise of his royal authority with respect to each Dominion are those chosen by the people of that Dominion. In the development of the Federal system in the Dominions, the doctrine adapts itself to the differ- entiation of ministerial agents for different purposes in the same locality. The principle, as I understand it, is expounded in R. V. Sutton 1, and is confirmed in Theodore v. Duncan 2. Those cases are instances, and others of an important character will be cited later, which illustrate the flexibility of the common law and its capacity to adapt its principles to the changing circumstances of the life of the community no less than to that of the individuals who compose it. It is the duty of the Judiciary to recognize the development of the Nation and to apply established principles to the new positions which the Nation in its progress from time to time assumes. The judicial organ would otherwise separate itself from

1(1908) 5 C.L.R., 789, at pp. 809-810. 2(1919) A.C., 696, at p. 706 31 CLR 439

the progressive life of the community, and act as a clog upon the legislative and executive departments rather than as an inter- preter. It is only when those common law principles are exhausted that legislation is necessary.

The constitutional doctrine to which I have alluded has long been in essence an accepted thesis. For instance, see Hearn's Government of England, 2nd ed., p. 133. It has lately, as pointed out by Mr. Dawson Hall in the Journal of Comparative Legislation for October 1920, at p. 201, received very emphatic expression and application on the occasion of the British Empire Delegation in Paris in 1919. The united views of the Prime Ministers were thus expressed: "The Crown is the Supreme Executive in the United Kingdom and all the Dominions, but it acts on the advice of dif- ferent Ministries within different constitutional units." That phrase within different constitutional units," is exactly expressive of the true position, and the doctrine I have stated is the key to the full understanding and interpretation of the third declaration in sec. 61 of the Constitution. When the Constitution was framed there were six separate Colonies, six separate " constitutional units," in Australia. In the aggregate they covered the whole territory of the continent of Australia. Each had its separate Constitution and laws, throughout the territory of each the Sovereign exercised the executive power of the Colony in accordance with the local Con- stitution, and by the advice of local Ministers, and that executive power, by whatsoever functionary exerted, extended to the execu- tion and maintenance of the Colonial Constitution and laws. But the limit of executive jurisdiction as to every Colony was its geo- graphical area, and that was easily gathered from its Constitution as a truth long familiar. Over the whole of that geographical area, and not beyond it, the local Government exercised execu- tive power-and normally the power was exclusive. But when the Federal Constitution of Australia was fashioned the new con- stitutional unit thereby created had to occupy (besides its own special territories) the same territory as the constituent States, and,

SO to speak, was superimposed upon them geographically. Two conditions had, therefore, to be satisfied. First, the constitutional domain of the new unit had to be delimited and distinguished from

31 CLR 440

the respective constitutional domains of the States, and, next, that

could not be done simply in terms of territory. It was found by applying to the territory certain powers-powers differently phrased with respect to the three branches of government. As to the executive power, it was delimited by attaching to the notion of COMBING,

territory, which is always connoted, the words " extends to the maintenance of this Constitution, and of the laws of the Common- wealth." In other words, the domain of the Commonwealth execu- tive power is a special domain of governmental action within the whole physical territory of the Commonwealth, and wherever else- as by covering sec. v. of the Constitution Act- its laws by Imperial authority operate. Of necessity, this domain is described but not defined in sec. 61. This constitutional domain is the field on which Commonwealth executive action lawfully operates. What I have said elucidates some of the contentions stated. It is clear now that there cannot be laid down as a rule of law that there is an unlimited application of the common law as exercised by the King's Govern- ment in England. Whatever of it is included in the Constitution belongs to the Commonwealth Government. And then it is also plain that the "constitutional domain" does not determine the existence or non-existence of the necessary power in relation to a given case, any more than marking the territorial domain deter- mines a similar question in relation to State executive action. Having ascertained in a given case that the constitutional domain has not been transgressed, we may have to go further and find whether on that field in the circumstances the power in fact exerted was lawful. To make my meaning quite plain Executive action in relation to a Commonwealth law is clearly outside State juris- diction and clearly within the field of Commonwealth jurisdiction. If done at all, it is assumed that the Commonwealth Government should do it. Nevertheless, the statute must be examined in con- nection with the circumstances to determine the legality of what was done. And SO with the provisions of the Constitution. Execu- tive action to execute or maintain the Constitution is clearly in the exclusive field of Commonwealth power, and no intrusion into the constitutional domain of the State. But the legal warrant for the particular step, if challenged by an individual affected, remains to

31 CLR 441

be determined. In other words, the third declaration is a definite constitutional delimitation as between Commonwealth and States, but does not definitely determine the internal validity of executive action towards His Majesty's subjects. To that I now address myself.

(3) The Legality of the first three Agreements.-There are, as have said, only two possible sources of authorization to make the agreements apart from Commonwealth legislation, namely, (a) Imperial statute other than the Constitution Act itself, and (b) some authority derived expressly or impliedly from the Constitu- tion. As already observed, no Imperial statute has been suggested and I know of none relevant. Then, what authority can be pointed to arising out of the Constitution to support the entering by the Com- monwealth Government into the agreements ? I do not confine myself to the mere words of the Constitution. I do not limit my search to express literal terms or to implication from the literal terms of the instrument. The mere fact of the creation of the Executive Government carries with it some constitutional conse- quences, unwritten, it is true, but nevertheless very real, that Courts recognize and that are included in the terms "maintenance of the Constitution."

But it is a good starting-point to ask whether there is to be found in the written terms of the Constitution, regarding it as a self-operative enactment, anything which in express words or by reasonable implication of any of its literal terms gives authority to the Commonwealth Executive Government to make the agree- ments or any of them. One feature of outstanding importance, when the three first-mentioned agreements come to be carefully scrutinized, is that they relate to internal trade of the States as well as to inter-State and foreign trade. The agreement of March 1917, which was the basis of both the other two, made the promise to pay the stipulated proportion of profits a condition of consent to purchase and sell intra-State quite as much as inter-State or (as to sales) abroad. Prima facie, at all events, that would be beyond the permitted region of the Commonwealth executive power as delimited by the third declaration in sec. 61. But not neces- sarily in the circumstances. Legislation, if valid, might at the time have brought it within the jurisdictional area, and (being now

31 CLR 442

unconcerned with legislation) it has been contended that, at the time the March 1917 agreement was made, the state of war of itself entitled the Government to make it by virtue of the Crown preroga- tive, and that the executive department of the Government was the sole judge of the necessity. And this has to be examined; and it COMBING,

forms a striking example of the insufficiency of the mere words of sec. 61, or the mere words of other sections of the Constitution. taken by themselves and apart from the circumstances of the moment to form an invariable measuring-rod of Commonwealth executive power. It is unquestionable law that "those who are responsible for the national security must be the sole judges of what the national security requires" (The Zamora 1 ). It is equally undoubted law that in presence of national danger in time of war the prerogative attracts, by force of the circumstances that exist, authority to do acts not otherwise justifiable. Lord Sumner, in Attorney-General v. De Keyser's Royal Hotel Ltd. 2, observes:

Of course, with the progress of the art of war, the scope both of emergencies and of acts to be justified by emergency extends, and the prerogative adjusts itself to new discoveries, as was resolved in the Saltpetre Case 3; but there is a difference between things belonging to that category of urgency, in which the law arms Crown and subject alike with the right of intervening and sets public safety above private right, and things which, however important, cannot belong to that category, but, in fact, are simply committed to the general administration of the Crown." Also per Lord Moulton 4. Viscount Haldane for the Privy Council, in In re Board of Commerce Act 1919 and Combines and Fair Prices Act 1919 5, in very clear words indicated the same principle in connection with sec. 92 of the Canadian Constitution. But it must appear to the Court, if the executive action is challenged, and it is the duty of the Crown as representing the Commonwealth to make it appear, that the Execu- tive considered the step necessary for the national security and in fact acted on that basis. In that case-at all events where the contrary is not SO demonstrably clear as to be beyond all possibility

1(1916) 2 A.C.. 77, at p. 107. 2(1920) A.C., 508, at p. 565. 3(1606) 12 Rep., 12. 4(1920) A.C., at p. 552. 5(1922) 1 A.C., 191, at p. 197. 31 CLR 443

the true position-the Court must accept the judgment of the Execu- tive and cannot investigate reasons. But, unless the Executive satisfies that condition, the Court is free to inquire as to the legality of the step complained of.

No imminent national danger is suggested as the motive force for the agreement of March 1917-none such is pleaded or shown in fact, it was the judgment, not of the Executive Government operating on the issue of public peril but of the Central Wool Com- mittee operating on the issues of the Imperial contract, local manu- factures and equalization of trade profits, that led to the pecuniary arrangements in question, and the Executive cannot delegate this supreme decision.

The war power then-apart from statute-is inapplicable to warrant the entry into what is normally State jurisdiction only. The consequence is that, in my opinion, were there no other reason than the transgression of the limits of the constitutional domain of the Commonwealth executive power marked out by the third declaration in sec. 61, that would-since separability is impossible- be enough to invalidate the agreement of March 1917 and, with it, the other two dependent agreements.

(4) Taxation.-There was a special ground of objection taken to the agreements and argued to repletion. I refer to their character as imposing taxation. I must confess that, having regard to the recent decision in the case of Attorney-General v. Wilts United Dairies Ltd. 1 (supplemented by the transcript of the shorthand report of the judgments in the House of Lords) and to the plain words of the Constitution, I have never been able to entertain any doubt that the three agreements were obnoxious to that objection. There being no words in the Constitution explicitly authorizing such a contract, the question must turn on implication. It is, of course, impossible to formulate any definition that could affirmatively test the legality of all contracts made by the Executive Govern- ment. The authority must be searched for in each case, and on this agreement the only authority vouched is the prerogative intro- duced by the presence of the Crown in the Constitution. If I assume

1(1921) 37 T.L.R., 884 : (1922) 38 T.L.R., 781. 31 CLR 444

for the moment that all other difficulties were absent, that an agree-

ment for the purpose of regulating the trade in wool and wool tops was entirely within the competency of the Government by virtue of the prerogative, I still have to inquire whether that included the power to insist on receiving as the price of consent the proportion COMBING,

of profits stipulated for. In other words, I have to inquire whether the words of the Constitution vesting and delimiting the executive power contain, even in war time, an implication of power to include such a provision. As to the nature of the condition made that the Company should pay over a proportion of its profits as consideration for consent, the words of Lord Buckmaster in the Wilts Case are exactly applicable. His Lordship said 1 :- However the character of this payment may be clothed, by asking your Lordships to con- sider the necessity for its imposition, in the end it must remain a payment which certain classes of people were called upon to make for the purpose of exercising certain privileges, and the result is that the money SO raised can only be described as a tax the levying of which can never be imposed upon subjects of this country by anything except plain and direct statutory means." Lord Atkinson and Lord Sumner gave a simple and direct concurrence. Lord Wrenbury delivered a short judgment to the same effect, but notwithstanding its brevity the learned Lord found it necessary to say it was the assertion of a right in the Executive to impose taxation" 2. Lord Sterndale gave a complete concurrence. It was vigorously urged for the Crown that here there was not a "levy" but an "agreement" for consideration. But that is only a recrudescence of the old struggle between the prerogative and the right of parliamentary control which is often thought to have ended long ago, but which finds its re-appearance even to-day, and the ideas by which the supremacy of Parliament was sought to be evaded are curiously found repeated in the Wilts Case, and even in the present case.

It was an early expedient on the part of the Crown in its claim to regulate trade to assert a prerogative to make agree- ments, apart from Parliament, with the merchants as a device to cover what was really taxation (Anson on the Law and Custom

1(1922) 91 L.J. K.B., 897, at p. 2(1922) 91 L.J. K.B., at p. 900 ; 900; 127 L.T., 822, at p. 823. 127 L.T., at p. 824. 31 CLR 445

of the Constitution, 4th ed., vol. I., "Parliament," at pp. 334- H. 335). It was also an early expedient to endeavour to escape from the illegality of a direct levy by forced "gifts, loans and benevolences," all of which were prayed against by the Petition of Right and are included in the broad prohibitory declaration of the Bill of Rights. A "loan" implies an agreement to repay, and the term is therefore a "specious appellation" (Taswell- Langmead's Constitutional History, 8th ed., p. 340). A " voluntary benevolence ¹" is still more a specious demand (ibid., p. 357). The Wilts Case 1 was a case of "agreement"; and, as the House of Lords definitely decides, under whatever name or by whatever device it is claimed, the proper name of the compulsive demand is, as Lord Buckmaster says, a "tax," and, as Lord Wrenbury says, "taxation."

At common law, therefore, the provision as to profits in the three first-mentioned agreements is "a tax" or "taxation." As the ordinary meaning of the generic word "taxation" is the same in Australia as in England, it falls within the appellation "taxation" in the Commonwealth Constitution, and, in the result, the first question must, as to the three first-mentioned agreements, be answered adversely to the Crown.

(5) The fourth Agreement and Appropriation.-The - fourth agree- ment-treating it as a separate independent bargain-stands on quite a different footing. It was made in war time, it gave control of Australian wool tops to the Government, and I am not prepared to say without fuller consideration that-apart from one feature, that of constitutional finance--it was, in the circumstances, outside the power of the Commonwealth Government. Sir William Anson, in his Law and Custom of the Constitution (3rd ed., vol. II., Part I., at pp. 145-146), in speaking of the functions of government very truly observes :- There are some things which are necessary to be done, and some rules necessary to be enforced, if a State is to be solvent and orderly at home and to maintain independence and dignity abroad. There are others which are not necessary but expedient to be done, and other rules in like manner to be observed, for the well-being of the community. The first of these represent the duty of the Executive par excellence, the essential business of government.

1(1922) 38 T.L.R., 781; 91 L.T. K.B., 897; 127 L.T., 822. 31 CLR 446

The second represent the desire of the State to regulate human

conduct SO as not merely to secure the existence of the community, but to promote its well-being." As the learned writer says, this division is not exhaustive nor is the distinction always easy to sub- stantiate presume he means not always easy to substantiate COMBING,

historically. But as a broad distinction it is sound. The distinction is pointed to in Coomber v. Justices of Berks 1, where Lord Watson refers to "the administration of justice, the maintenance of order, and the repression of crime," as being "among the primary, and inalienable functions of a constitutional Government' and propergovernment purposes and uses." Therein lies the vast differ ence between a State, for instance, carrying on ordinary industrial operations that a private person might be authorized to carry on, and its performance of what Lord Watson calls "inalienable functions of government" which cannot be delegated to private individuals. In ordinary times of peace, the business of wool-top manufacture would prima facie fall within the second class formulated by Sir William Anson and be within executive power only when specially authorized by a competent law. But in war time it may be-I do not need to say more-that the emergency would SO widen the application of the defence power without intruding on the special jurisdiction of the States, and would SO enlarge the implied authority of the Executive in the exercise of the suprema potestas in the manner indicated in the authorities I have earlier quoted, as to bring the case within Anson's first class. I do not, therefore, dismiss this as neces- sarily invalid on general principles-that is, as necessarily outside the third declaration of sec. 61. It is another and I think a very striking instance of the impossibility of regarding the mere written words of the Constitution as affording the only test of validity. Those written words have to take into account the circumstances of the moment and the extent of constitutional development. The doctrine of responsible government, for instance, is invisibly but none the less inextricably and powerfully interwoven with the texture of the written word, and any interpretation of the document which disregarded the implication of that doctrine would be false and misleading. For the importance of this consideration I refer

1(1883) 9 App. Cas., 61, at p. 74. 31 CLR 447

to the judgment of four Justices of this Court in Amalgamated Society of Engineers v. Adelaide Steamship Co. 1. That doctrine is, in my opinion, of vital importance in relation to the question I am now answering, because it determines whether the authority of the Executive Government extended to make a contract to pay £64,000 a year to the Company. The statement I have already SPINNING made as to the terms of the contract suffice to show that, according to law (sec. 81 of the Constitution and the Audit Act and recognized constitutional practice), whatever moneys the Company was bound to pay to the Government as the result of the Government's trading would have to be paid into the Consolidated Revenue Fund. It has long been an accepted thesis of the Constitution, as declared by the Committee on Public Moneys in 1857, that it is essential to a complete parliamentary control of the public money that no portion of it should be arrested in its progress to the consolidated fund, from which alone it can be issued and applied with parliamentary sanction." For this and other references to the Reports of that Committee I am indebted to Colonel Durell's informative work on Parliamentary Grants. The Audit Act enforces this essential safeguard. And, leaving aside any implication of indemnity to the Company in case of loss, the specific provision as to £64,000 a year, not by way of deduction from proceeds, not limited to a profit fund, but a straight- out liability out of unspecified Government moneys, differentiates this bargain from the three prior agreements, and leaves it, not one of "taxation," that is, taking the Company's money, but one of "payment" to the Company of public money. How can that be justified without legislation ? In my opinion it cannot. And the clear authority for that is Mackay v. Attorney-General for British Columbia 2. There Viscount Haldane, speaking for a very powerful Judicial Committee, comprising besides himself the present Lord Chancellor, Lord Dunedin, Lord Shaw and Lord Phillimore, said 3:

Then there is a further objection to the agreement based on the recent decisions of the Court of Appeal and of the House of Lords in Attorney-General v. Wilts United Dairies Ltd. 1. In view of the scarcity of food under war conditions in Great Britain, the Food Controller was authorized to grant licences to dairymen in Wiltshire, Hampshire, &., to purchase milk in the south-western counties of Devon, Cornwall, &. (rich milk-producing areas) subject to such conditions as he might determine. He issued such licences to a dairying company subject to the condition of paying 2d. per gallon

1(1921) 37 T.L.R., 884 ; (1922) 38 T.L.R., 781. 31 CLR 474

to the Exchequer the company signed an agreement to observe

this condition in consideration of the grant of the licence and an action was brought by the Crown to enforce the payment. There had been no order or regulation made under the relevant Acts expressly authorizing the demand for the payment of money but SPINNING

the Crown relied on the order authorizing the issue of licences "subject to such conditions as the Food Controller may deter- mine." It was held by the Lords Justices that this general power to impose conditions did not authorize the Food Controller to require the company to pay money to the Crown as a condition of granting him a licence to carry on his ordinary right to trade: that there must be, under the Bill of Rights, express authority from Par- liament (by statute or authorized regulation), to make such a pay- ment of money obligatory and that the agreement was "illegal and unenforceable." As Atkin L.J. said 1 If an officer of the Executive seeks to justify a charge upon the subject made for the use of the Crown

he must show, in clear terms, that Parlia- ment has authorized the particular charge.

There are clearly no express words, and all the powers given appear capable of perform- ance without any power to levy money." It appears from that case (what I should otherwise have doubted) that the fact that there was an agreement to pay, not a direct levy, made no difference :-

It was illegal for the Food Controller to require such an agreement as a condition of any licence. It was illegal for him to enter into such an agreement" 2. The case was affirmed in the House of Lords: and no one has suggested any ground on which we should hold the principle laid down in that case as being inapplicable to the facts before us.

I do not ignore the argument that the money to be paid to the Commonwealth Government was not to be available for the general purposes of the Government, but was meant (as is contended) for some purposes of the pool. But, in the first place, the legal position of the Government as to the money is expressly stated in the agree- ment-the money was to be "at the disposal of the Commonwealth Government" (clause 7), "at all times be disposed of as the Com- monwealth Government shall direct" (clause 10). This was in law

1(1921) 37 T.L.R., at p. 886. 2(1921) 37 T.L.R., at p. 887. 31 CLR 475

absolute property, and nothing less (Kellett v. Kellett 1 ); and this Court has to act on the legal relations only. What is property but the absolute right of disposal ? We have nothing to do with political considerations, with such responsibility to Parliament and to electors as might impel the Government to distribute the money among members of the pool or use it for some purpose of the pool. In the second place, even if we should take such political considera- tions into account, the bargain would still remain obnoxious to the objection that a power conferred by regulation to give or withhold consent cannot be used for purposes foreign to the regulation, and, above all, cannot be used at the expense of A for the benefit of B. C, D, E, &.

I am, therefore, of opinion that the agreement of 1st March 1917 is invalid on three grounds (1) because the regulations made under the War Precautions Act, and declared by the Commercial Activities Act to be "duly made " do not authorize any such agree- ment: 2 because the agreement is an abuse of the power-a "fraud on the power" to give consent as conferred by the regula- tions: (3) because, according to the Wilts Case (2), it transgresses the principles of the Bill of Rights without the express authority of Parliament. These grounds, indeed, seem to merge into one ground, with three aspects. The promise of the Company to pay to the Government half the profits is void and as the last recital of the agreement makes all the promises on one side considerations for all the promises on the other side, the whole agreement is void and unenforceable.

(2) As for the Agreement of January 1918, found as a fact by the learned Judge, and modifying the agreement of 1st March 1917, have come to the same conclusion. Without going into the circum- stances under which this agreement was made by the sub-committee and confirmed by the Prime Minister (so far as he could confirm it),

I may say that it carries on the provisions of the previous agreement until the price reaches 72d. per lb. for tops, and when the price reaches more than 72d. not half but all the proceeds are to be paid to the Government, by payment into a trust account of the sub- committee, or by endorsed store warrants, or by approved bonds.

1(1868) L.R. 3 H.L., 160. 2(1922) 38 T.L.R., 781. 31 CLR 476

In my opinion, all the three grounds of objection apply to this agree-

(3) As for the Agreement of 26th and 27th September 1918.-This, in my opinion, is invalid also-and à fortiori. For the Common- COMBING,

wealth Government refused to exercise its power to give consents to the sale of wool tops, under reg. 10, unless and until the Company agreed to let all the wool tops manufactured by the Company after 31st August 1918 be the property of the Commonwealth, and unless the Company undertook to carry on the business of the Company as agent for the Government at an annual remuneration. The Government also refused even to consider the giving of any more consents until the Company agreed to pay all that was due under the previous agreements. I do not concern myself with sundry questions as to the execution of this third agreement, or with the absence of the authority of the Governor-General in Council, or of Parliament, or with the question as to whether in law this agreement contained in fact two independent agreements, one for the past transactions and one for the future. It has been found as a fact by my brother Isaacs that the clauses 2, 3 and 4 of the new agree- ment as written (as to back payments) were meant to be an inde- pendent agreement from clauses 1 and 5 (as to future payments) and I accept that finding. But this still leaves it open to us to say whether in law they must be treated as one, regard being had to the construction of the document itself. I am strongly inclined to think that the document on its true construction compels us to treat the two agreements as one but even if we are to accept it that there were two separate and independent agreements as a matter of law, the agreement as to the future is invalid on each of the three grounds which I have stated, and the agreement as to the past is invalid as being in furtherance of the previous agreements which were illegal.

I cannot refrain from comment on the pleadings in this case. They, at all events the defendant's pleadings, are SO long, rambling and diffuse, especially with the added particulars, as to add very considerably to the task of the Court and the protraction of the pro- ceedings. They constitute rather a discursive argument, with reckless reiterations, and they are worse in this respect than any pleading

31 CLR 477

I have ever seen.

They fill over sixty-two pages of broad sheets. The fact that large sums of money are involved is no excuse for such prolixity. If this case should come to be considered by some other tribunal, it will probably be noted with surprise that in this Court it was not until what is grotesquely called "amended further pleading to amended reply, and amended reply to amended defence to cross-action" that the main point was taken-that the Common- wealth Government " had not at any material time any lawful right to demand a licence fee or a share of profits or other interest in the Company's business as a condition or term of giving consents to the sale of and/or permits for the shipment of wool tops," &. The issues of fact and law are really few; and they could easily have been compressed within two or three pages at the most if proper effort had been made to confine the statement to "the material facts on which the party pleading relies to support his claim or defence," as prescribed by our Rules (Order XVII., r. 1; and see r. 13).

In my opinion, the judgment as proposed by my brother Isaacs J. in his reasons for judgment, including the order as to costs, fits the circumstances of the case.

GAVAN DUFFY J. In view of the opinion which I have already expressed, it is enough to add that I can find no authority from Parliament to make any of the contracts relied on by the parties in this case. The result is that they are not the contracts of the Commonwealth, and both the action and the cross-action must, therefore, fail. The reservation for this Court was made under sec. 18 of the Judiciary Act, and is as follows :- I reserve for the consideration of the Full Court the question how consistently with the facts as found by me judgment should, having regard to the amended pleadings and particulars thereunder and the evidence as appears from the transcript of proceedings at the trial and the exhibits, be entered with respect to the several claims made in the action and the cross-action respectively. and I direct that this case be argued before the Full Court as hereinbefore mentioned." In my opinion we ought to determine the question reserved for our con- sideration by saying that judgment should be entered for the defen- dant with respect to the several claims made by the plaintiffs in the

31 CLR 478

action and for the plaintiffs in respect of the several claims made by

the defendant in the cross-action. We should also direct that the costs of the proceedings before us shall be costs in the action. It will then become the duty of the learned Judge who tried the action to cause judgment to be entered in conformity with our determina- COMBING,

tion and to allocate the costs of the action as he may in the exercise of his discretion think fit.

On the action judgment entered for the defendant.

On the cross-action judgment entered for the plaintiffs. Defendant to pay costs of and occasioned by the issues of fact, including the whole of the costs of the trial; and, except those costs, the parties to bear respectively their own costs of the action and of the arguments in the Full Court. Solicitor for the plaintiffs, Gordon H. Castle, Crown Solicitor for the Commonwealth.

Solicitors for the defendant, Fink, Best &Miller.