Between: Attorney-General (NSW)
And: Homebush Flour Mills Ltd

Judges: Latham CJ
Rich J
Starke 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:
McTIERNAN J

The validity of the Flour Acquisition Act 1931, enacted by the legislature of New South Wales, is called in question by the defendant which demurred to an information filed by the Attorney-General of New South Wales in the Supreme Court of the State in an action brought on behalf of His Majesty to recover from the defendant moneys alleged by the informant to be due and payable by it under the above-mentioned Act. One of the grounds of the demurrer is that the Act invades the exclusive powers of the Parliament of the Commonwealth to impose duties of excise and that the information is therefore bad in law. The question for decision is whether the moneys sought to be recovered are an excise duty on flour.

The Act provides that the Crown shall sell all flour which was vested in or acquired by it under the Act. The rights of all persons divested of property under the Act are converted into claims for compensation according to the rate fixed under its provisions. The Act obliges them to hold the flour after its expropriation for the Crown and exposes them to the risks incident to property in the flour as if it had not passed to the Crown. The Act gives a discretionary power to the Crown to take possession of the whole or any part of the flour. It says that the expropriated owner of any flour shall have the first right to purchase it from the Crown, and by a peculiar provision declares that he may exercise this right by selling the flour, and if he does, he shall be deemed to have purchased it. The Act sets up machinery for fixing a standard price to be paid on the purchase of the flour from the Crown. It directs that there is to be set off against the moneys, the amount of which is based on the standard price, payable to the Crown by any person, who either bought or is deemed to have purchased flour from the Crown, the compensation payable in respect of the expropriation of the flour. The excess of the purchase money over the compensation is cloaked under the title of "the balance of the purchase money." It is payable to the Crown by the purchaser or the presumed purchaser, as the case may be. The moneys paid in discharge of the liability are directed to be applied by the Executive for the relief of necessitous farmers.

It follows that a miller could sell any flour which he produced in his business and to which the Act applied, notwithstanding its acquisition from him by the Crown: such sale took effect as a purchase from the Crown by the miller as well as a sale by the miller to his buyer; the miller became liable to make a contribution to the revenue, and the liability was dependent on the sale which he made to the buyer of the flour. Now the Act did not lay the miller under a legal obligation to exercise this power of disposing of the flour after its acquisition without expressly purchasing it from the Crown. But legal compulsion to do an act to which liability to pay moneys to the Crown attaches, is not necessary to make such liability taxation. It may be an exaction although there is no legal compulsion to do the act to which it attaches. A liability becomes an exaction if the legislature attaches it to an act which a person is constrained to do in order to avoid loss or inconvenience to his business or other serious detriment. The miller was confronted with the alternative of holding the flour or purchasing it from the Crown or selling it to his customers without actually purchasing it from the Crown. If he merely held the flour, his possession of it would be regulated by provisions which indeed were calculated to deter an expropriated owner from such a course. Moreover, it is manifest that the intention of the Act was that the flour should be sold in order to enable the Crown to derive revenue. It was not necessary for the miller to purchase the flour from the Crown to qualify himself to sell it, and if he purchased it the Minister could compulsorily resume the whole or any part of the stock. Further, by purchasing the flour he became liable to pay the excess of the purchase money over the statutory compensation payable in respect of the first expropriation; a subsequent acquisition from him of the same flour could be made by the Minister at the rate fixed by the statutory committee. The legislature has however contrived

to enable the miller to sell any flour which had been expropriated as if there had been no expropriation. But it has attached to any sale made under this power the liability of contributing money to the revenue, the expropriation being the means to an end. In my opinion this liability is a tax or an exaction levied on the miller by the Act. For if he were to refrain from exercising the power to sell the flour without expressly purchasing it and made all his sales to customers from stocks actually purchased from the Crown, he would forgo valuable immunities and advantages and expose himself to serious interference by the Executive in his business. The occasion for levying the liability created by the Act on a miller or any person exercising the power to sell any flour is the sale of such flour. In my opinion the liability is therefore an excise tax on flour (See Peterswald v Bartley; ^[F33] The Commonwealth and Commonwealth Oil Refineries Ltd v South Australia; ^[F34] John Fairfax & Sons Ltd and Smith's Newspapers Ltd v New South Wales ^[F35] ). Judgment upon the demurrer should be given for the defendant.