Attorney-General (NSW) v Homebush Flour Mills Ltd
56 CLR 390(Judgment by: RICH J)
Between: Attorney-General (NSW)
And: Homebush Flour Mills Ltd
Judges:
Latham CJ
Rich JStarke J
Dixon J
Evatt J
McTiernan J
Subject References:
Constitutional law
State statute
Validity
Conflict with Constitution (Cth)
Duty of excise
Compulsory acquisition of flour
Proceeds of sale received by Minister
Payment of compensation and administrative expenses
Balance for governmental purpose
Legislative References:
Constitution (Cth) - s 90
Flour Acquisition Act 1931 (NSW) No 10 - s 1(3); s 3(2); s 3(3); s 3(8); s 4(1); s (4); s (7); s 5(1); s 5(2); s 6
Judgment date: 1 May 1937
MELBOURNE (HEARD IN SYDNEY)
Judgment by:
RICH J
This proceeding arises out of an information filed by the Attorney-General of New South Wales against a company carrying on the business of flour milling for the recovery of a large sum under the provisions of the Flour Acquisition Act 1931-1935 (N.S.W.). The information contains two counts both of which were demurred to. It is unnecessary to enter upon a discussion of the distinction between the two counts because it is agreed that under each of them the obligation to pay the money claimed by the Crown must depend upon the validity of the statute.
The defendant had challenged the validity of the material provisions of the Act of Parliament upon the ground that it contravenes the provisions of s. 90 and s. 92 of the Commonwealth of Australia Constitution Act. In view of the nature of this attack upon the constitutional validity of the legislation an order was made under s. 40 of the Judiciary Act 1903-1934 removing the proceedings into this court. The argument before us was confined to s. 90 of the Constitution. The defendant's contention is that, properly understood, the liability in respect of which it is sued constitutes a duty of excise and that accordingly the provisions of the Flour Acquisition Act 1931 which impose it are an attempt to invade the exclusive power of the Commonwealth Parliament to impose duties of excise.
In The Commonwealth and Commonwealth Oil Refineries Ltd v South Australia [F18] I expressed the opinion that s. 90 gives exclusive power to the Commonwealth over all indirect taxation imposed immediately upon or in respect of goods, and does so by compressing every variety thereof under the term "customs and excise." I said that I was not aware of any authority which explicitly denied the application of the word excise to duties upon goods collected in respect of use, consumption or sale because the duty is not confined to goods of home manufacture. These views I repeated in John Fairfax & Sons Ltd and Smith's Newspaper Ltd v New South Wales. [F19] But I said that I gathered from the opinions of the majority of the court in the South Australian Case [F20] that they held that the expression "duties of excise" was used in the Constitution with the restricted meaning, that is, restricted to duties upon or in respect of goods of local production. I remain of the opinion which I expressed in those cases, but the limitation to goods of local production is of no importance in the present case. The flour upon which the material part of the Flour Acquisition Act 1931 operates is flour gristed from wheat so as to come into existence in New South Wales.
The real question in the present case is whether the levy of money effected by the Act constitutes a tax. If it does there can, I think, be no doubt that it is a tax upon the production of flour in New South Wales and therefore an excise. The form of the Act is palpably dictated by the want of power in the State Parliament to impose an excise. By s. 3 (2) all flour coming into existence in New South Wales is expropriated and vested in the Crown. All rights and interests in the flour are converted into claims for compensation (s. 3 (3)). The amount of compensation is to be calculated at the fair and reasonable price of flour as fixed by a committee upon which officers of the Crown preponderate. The price is to be fixed at a uniform rate without regard to grade or quality (s. 5 (1)). So far the legislation would appear to be a mere exercise of the State's eminent domain with a provision for proper compensation. But inspection of the other provisions dispels the view that the acquisition of flour by the State for its own purposes was a real object of the legislation. No government purpose for the acquisition or use of flour is suggested. If the Crown is called upon to pay compensation, then the Crown is left with the flour on its hands. All the Crown had to do with the flour is to sell it (s. 6). Although property in the flour passes to the Crown as it comes into existence, possession is not to be given to the Crown unless and until it is demanded. The flour is left in the possession of the miller who is to hold for the Crown at his own risk. Further, if he forces the Crown to pay compensation he is not entitled to payment until the flour has been resold by the Crown and then he is to receive either the net proceeds which the Crown realizes or the committee's reasonable price, whichever is the lower (s. 6 (6)). These provisions it will be seen leave the miller in a predicament, if not an impasse. The Act, however, provides a way out for him and there can be no doubt that the way out is the course which the legislation intends that he shall be impelled to take. It provides that he may buy back the flour at a fixed price and that if he sells the flour which he had gristed he shall thereby be deemed to exercise his right of purchase. It provides that the fixed price shall be set off against the compensation and the difference shall be payable. Thus the miller will remain in possession of the flour he grists and can carry on his business and sell his flour as freely as before, provided that he pays to the Crown whatever excess there may be of the price fixed for repurchase from the Crown over the committee's price on which compensation is computed. The Act does not say that the price fixed for resale to the miller shall be higher than the committee's price but it contemplates such an excess, for it provided that the proceeds shall go to a fund for the relief of distressed farmers. The price of resale is to be fixed by proclamation by the Executive (s. 6 (4)). In fact prices have been fixed the difference between which stood at 30s. per ton. The result was that the miller was compelled either to cease gristing or to pay 30s. per ton to the Crown on the flour which he gristed and sold or to hold the flour at his own risk and expense until the Crown should think fit to sell it to someone else, when he would become entitled to the net proceeds or the committee's price, whichever was the lower.
In my opinion statutory provisions which create these alternatives and leave none other really penalize a failure to pursue the course which the legislature desires. On the face of the statute it is evident that its purpose was to obtain 30s. per ton on the flour gristed in order to apply it to the relief of distressed farmers. Because s. 90 of the Constitution prevents the New South Wales legislature from saying in terms to millers: "You shall pay 30s. per ton on all flour you grist and sell" and from giving all the usual remedies for the recovery of a debt due to the Crown, a complicated set of provisions is adopted producing the result that unless the miller does pay 30s. a ton to the Crown he encounters very unpleasant consequences quite capable of proving his ruin. I think it would be absurd for a court to say that because the consequences of failure to pay the money are a more unpleasant alternative which the party is free to choose and payment is not enforced by means familiar as legal remedies, therefore the actual constraint which they effectually impose to pay the money may be ignored and the payment treated as voluntary or contractual and not as an exaction. Of course when the miller sells the flour and so avoids the unpleasant alternative he does incur a legal duty to pay the excess of the one price over the other, viz., the thirty shillings.
The substance of the legislation is to impose a tax subject to a means of escape which no one would adopt if he considered the business and the pecuniary consequences. This in my opinion is taxation. Indeed, it is more clearly taxation then the levies which in the Wool Tops Case [F21] were held to constitute taxation. The case has no resemblance to Crothers v Sheil [F22] where an ordinary statutory pool of a commodity-milk-was upheld. There, as it came into existence, the commodity was made the property of a board. The board sold it and distributed amongst the suppliers the net proceeds in proportion to the supplies. In arriving at the net proceeds, expenses of administration, contributions to sinking fund and interest on advances or loans were to be deducted. It was contended that because of these deductions there was a levy on milk. In answer to this argument I said: "In my opinion there is no substance in the argument. The provisions of the Milk Act do not exact any pecuniary payment from the dairy farmer. They do not impose any liability in respect of the ownership, transfer, sale or production of goods. They merely contain a scheme for the compulsory acquisition of milk and the payment of the price or compensation to be borne by the proceeds arising from the resale by the board. The fact that these proceeds are subject to deductions would not convert the scheme into one for taxation". [F23] In the present case there is an exaction of a pecuniary payment from the producer of the commodity and a liability is imposed on the production and sale of goods.
In my opinion the provisions of the Flour Acquisition Act are void as contrary to s. 90 of the Constitution and judgment should be given to the defendant on the demurrer with costs.