Attorney-General (NSW) v Homebush Flour Mills Ltd
56 CLR 390(Judgment by: DIXON J)
Between: Attorney-General (NSW)
And: Homebush Flour Mills Ltd
Judges:
Latham CJ
Rich J
Starke J
Dixon JEvatt 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:
DIXON J
The question for decision is whether a sum of money claimed by the Crown in right of New South Wales under the Flour Acquisition Act 1931 of that State is a duty of excise.
Under s. 90 of the Constitution the power of the Parliament of the Commonwealth to impose duties of excise is exclusive.
The imposition upon those producing flour of an ordinary legal obligation to pay a sum of money to the Treasury of New South Wales was not part of the plan of the material provisions of the Flour Acquisition Act. But the statute made elaborate provisions under which flour millers were put in such a position that it was impracticable for them to grist and sell flour systematically unless in respect of every ton of flour sold a fixed amount was paid to a special fund in the Treasury. The system ceased when the Commonwealth Parliament imposed a tax upon flour by the Flour Tax Assessment Act 1933 and Flour Tax Act 1933 and passed the Wheat Growers Relief Act 1933. But, while it remained in operation, a practical constraint lay upon every miller to pay an amount per ton depending upon the determination of the Executive of the State, an amount which, during part if not the whole of the period, was fixed at thirty shillings. The legislation required that two prices should be fixed for flour. A committee was established to fix one price. The committee consisted of the Minister, two officers of his department, a representative of the millers and a representative of the master bakers. Their duty was to fix a fair and reasonable price of flour at a uniform rate without regard to grade or quality. The other price was called "the standard price." The duty of fixing that price was reposed in the Governor in Council; it was to be notified by proclamation published in the Gazette. The statute contains no express provision requiring that the standard price should be higher than the first price, but in fact it was fixed at thirty shillings in excess of that price and it is evident that this accords with the policy of the legislation. As and when flour was gristed in New South Wales the statute vested it ipso facto in the Crown. All interests in the flour were converted into rights to compensation. The compensation payable was to be the fair and reasonable price fixed by the committee, but this was subject to a qualification later appearing. It was the duty of the Minister to sell any flour vested in the Crown under the Act. The owner of the flour immediately prior to its so vesting, that is, the miller, was given the first right of buying the flour. But he must buy it at the standard price. If he did, the two prices were to be set off and he became liable to the Crown for the difference. There was no need for him to exercise his option to buy expressly. It was enacted that the sale or disposition by him of the flour should be deemed an exercise of his right to buy and that, if he made a sale or disposition, he should be liable to pay the Minister for the flour. At times prescribed by regulations the miller must send in returns of the flour coming into existence in his hands. The regulations provided for fortnightly returns and prescribed forms of return which all assumed that the miller would sell the flour and thus become liable for the standard price.
In accordance with the statutory provisions which so far I have summarized, if the miller made the returns and paid the difference between the two prices, he could carry on his operations of gristing wheat and selling flour with no change. This difference went to a special fund established under the Audit Act called the "Relief to Necessitous Farmers & Graziers Working Capital Account." The Flour Acquisition Act provided that the fund should be applied to the relief of necessitous farmers. The difference went to the fund because the statute provided that the proceeds of any sale received by the Minister should be paid to the Treasury and carried to a special account the balance of which, after payment of any compensation payable under the Act and of expenses, should be applied to the fund. Thus, if millers carried on their trade by selling the flour they gristed, a levy for a public purpose would be made upon them at a flat rate per ton. On selling the flour the miller would incur a legal liability to the Crown at that rate. But the statute did not impose upon the miller any obligation enforceable at law to re-acquire the flour he gristed. What would be his position if he did not? He would then claim compensation at the fair and reasonable price fixed by the committee. But his right to that compensation was qualified. The Minister could sell the flour when and at such price and on such terms as he chose. If the sale produced less than the price fixed by the committee, the statute enacts that the miller should get only the net proceeds of the sale so made by the Minister. If it produced more, he would get compensation according to the price fixed by the committee. In the meantime the miller would hold the flour on behalf of the Crown, but at his own risk so that, in the event of loss or destruction, he would receive no compensation. The statute so enacted. He would be obliged to hold the flour until the Minister sold it, unless the Minister thought fit to take possession of it. If he had made forward contracts he could not fulfil them out of his own flour, and, if he bought flour from other millers in New South Wales or from other States, it would be open to the Minister to acquire it under a particular power of acquisition conferred by the Act and to do so at the rate fixed by the committee.
It is apparent that the situation in which these provisions of the statute placed the miller afforded a strong incentive to him to take the step of selling whatever flour he gristed and of thus incurring the obligation of paying the rate per ton by which the standard price exceeded the fair and reasonable rate. He might stop milling. If he did, there would have been no flour and for that reason no payment. In the same way an avowed excise might operate to prevent the production of a commodity, and when there is no production then there would be no levy payable. But, if the miller produced flour, he then came face to face with a dilemma created by the statute. The dilemma consisted of alternatives prescribed by or under the statute. The one, namely, sale, involved the levy of a tonnage rate. The other involved loss of his power of disposal of the flour, storage of the flour at his own risk and expense for as long a period as the Executive Government chose, and a title to no greater sum than the net proceeds of the flour when and if sold by the Crown and perhaps to less. It involved also the suspension of the miller's ordinary business. The disadvantages thus artificially created form a strong deterrent under the influence of which he would be extremely unlikely to reject the alternative involving payment of the subvention to the special fund at the ascertained rate per ton. It is evident on the face of the statutory provisions in question that they could achieve no purpose except raising the fund. For, except for the statistical value of the returns of flour milled, the elaborate clauses appear capable of producing no other useful result. It is reasonably clear, therefore, that the desired end is sale by the miller and payment of the subvention. Thus, although it is true that the statute does not impose an ordinary legal duty to pay enforceable by judicial process, it makes the raising of money its purpose and seeks to secure fulfilment of that purpose by imposing a clear detriment upon the miller who refrains from paying. This appears to me to be indistinguishable from a sanction incurred by failure to pay. Suppose the statute had required the miller under penalty to buy back from the Crown at the standard price the flour on his hands which had vested in the Crown as he produced it by milling. The result would have been that, unless he disobeyed the provision and incurred the penalty, a compulsory acquisition and re-acquisition would have taken place at different prices and the excess of the second price over the first would have been payable by the miller to the Crown. As performance of the legal duties in that case imposed by statute would produce no other effect than direct liability to the Crown in a money sum calculated at a rate per ton on flour produced, and to be applied to public purposes, it would, I think, clearly have amounted to a tax in spite of the process of acquisition and re-acquisition and set off of prices by which the result was achieved. Having regard to its incidence the tax would have been a duty of excise on flour. But, instead of compelling the miller under penalty to re-acquire the flour at the standard price, the statute left him at liberty to take compensation for his flour without re-acquiring it, but imposed upon him conditions or exposed him to consequences calculated to deter him from adopting such a course. The difference between, on the one hand, the express imposition of a legal duty to take a given course with penal consequences for breach, and, on the other hand, the requirement that the party shall pursue either that course or some other course exposing him to greater burdens or other worse consequences lies in the form of the sanction, its nature and the mode of imposing and enforcing it, rather than in the substantial result. When, for the purpose of securing conformity to a prescribed course of conduct, legislation creates for those who do not conform a situation involving greater pecuniary or other burdens, it adopts a method of penalizing departure from the rule it lays down.
The course of conduct in the present case consists in no more than the regular payment to the Treasury of money calculated according to a defined or ascertained measure. Upon the face of the statute and the proclamations considered together, and indeed of the statute considered alone, it appears that it was the purpose of the provision now in question to obtain such payments from millers of flour in New South Wales. When the desired contributions are obtained not by direct command but by exposing the intended contributor, if he does not pay, to worse burdens or consequences which he will naturally seek to avoid, the payment becomes an exaction. The fact that no legal obligation to pay is imposed enforceable by direct legal remedies, civil or criminal, will not, in my opinion, prevent the exaction fulfilling the description of a tax; because in truth it is exacted by means of sanctions designed to that end, sanctions consisting in the detriments arising from the adoption by the taxpayer of the alternative left open by the legislation.
That the only alternative left open involves detriments so substantial as to form a powerful deterrent to its adoption I am unable to doubt. That it was intended to have such an effect appears from an examination of the statute and from the difficulty of discovering any other object it was designed to achieve. There are thus three features present, viz., a course left open to the producer of flour involving contributions to the Treasury for a public purpose, an alternative course, the only alternative if production continues, which involves detriment to the producer who takes that course, and a purpose of so inducing him to make the contribution.
If all this had been done by the State legislature itself, I should have thought that it amounted to the imposition of a duty of excise. But an essential part of the plan is the adoption of a standard price that exceeds the fair and reasonable price fixed by the committee and the duty or power of fixing the standard price is delegated to the executive. It sufficiently appears from the Act itself that it contemplates the adoption of a standard price in excess of the committee's price. For it assumes in its provisions that there will be a difference payable to the Minister by the miller and that there will be a resulting fund for farmers' relief. But, in any case, as the act of the Executive must depend upon the power conferred by the legislation, if it is the Executive determination which completes the plan that results in the imposition of an excise, the attempt to confer the power so to complete the plan must infringe upon the exclusiveness of the federal legislative power to impose duties of excise. It is, perhaps, needless to add that the complicated scheme of State enactment is to be accounted for by the absence of power to impose duties of excise. It is an attempt to raise a fund by contributions obtained as flour is milled and sold, contributions working out at a rate per ton. The fact that it is an attempt to secure the same result as would have been obtained by a duty of excise if such a duty fell within the legislative power of the State Parliament does not necessarily mean that the attempt fails. The same ends may be attainable by different means. Some means may be within power, others may be outside it. But it does explain what otherwise might appear the strange form and policy of the enactment. It explains why it is that on a close examination of the statute and a consideration of its actual operation, it turns out to be a means of imposing what in truth is a duty of excise.
For these reasons I am of opinion that judgment in demurrer should be given for the defendant.