Opinion Number. 1428


SHIPPING POWER OF COMMONWEALTH TO IMPOSE tax or tariff per ton of goods or per passenger carried interstate or between different Australian ports in same State, levied only in respect of goods or passengers carried in ships which do not comply with Australian conditions as to wages and accommodation

Key Legislation

NAVIGATION ACT 1912: COLONIAL LAWS VALIDITY ACT 1865 (U.K.) (28 & 29 Vict. c. 63) s

The Comptroller-General, Department of Trade and Customs

The Comptroller-General of Customs has forwarded me the following memorandum for advice:

  • In the Report of the Royal Commission on the Navigation Act (Parliamentary Paper 1923/24 No.103) two Commissioners, Senators Duncan and Elliott, made the following recommendation:
  1. That the Coastal trading provisions of the Navigation Act be repealed.
  2. That there be substituted therefor adequate duties, under the Customs Tariff Act, upon foreign shipping, with a lesser preferential rate on British shipping, calculated in the case of cargoes on the rates of freight charged per ton and, in the case of passengers, upon the fares charged.
  3. All other sections of the Navigation Act to stand.
  1. It must be assumed, seeing that the proposal under discussion is put forward as in substitution for the coasting trade provisions of the Navigation Act, that the duties suggested to be imposed on freights and fares relate only to the carriage of passengers and cargo between ports in Australia, and not to trade to and from the Commonwealth, and that the term ‘British shipping’ as used in the recommendation is not intended to include ships registered in the Commonwealth.
  2. The question has been raised as to whether the Commonwealth Parliament has power to enact a law to give effect to paragraph 2 of this Recommendation which would be valid and effective.
  3. The High Court, in Union Steamship Co. v. the Commonwealth (1925)1 held that section 2 of the Colonial Laws Validity Act 1865 has application to legislation by the Commonwealth Parliament under the Constitution and that consequently any Commonwealth legislation which is repugnant to an Imperial enactment extending to the Commonwealth is void and inoperative.
  4. Section 736 of the Merchant Shipping Act 1894 provides that the legislature of a British Possession may, by any Act or Ordinance, regulate the coasting trade of that British Possession, subject to certain conditions, which include the following:
  5. (b) the act or ordinance shall treat all British ships (including the ships of any other British Possession) in exactly the same manner as ships of the British Possession in which it is made.

  6. This apparently precludes the imposing of any tax or duty on freights or fares for goods or passengers carried by oversea British ships unless a similar tax or duty was also imposed on the freights and fares of locally owned vessels.
  7. A further condition imposed upon Colonial legislation relative to the coasting trade of a British possession is that where by a Treaty made before 13.5.69 any foreign State had any right or privilege in respect of the coasting trade of a British possession, such right or privilege shall continue to be enjoyed by the ships of that State.
  8. No foreign maritime power of any importance has, at the present time, any treaty rights in respect of participation in the coasting trade of the Commonwealth.
  9. But from another point of view it would appear that no tax can be legally imposed either by the Commonwealth or a State on the carriage of passengers or cargo between Commonwealth ports even in respect of foreign shipping.
  10. Section 92 of the Constitution Act provides that on the imposition of uniform duties of customs, trade, commerce and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.
  11. The view is therefore taken that any law which purported to impose a tax upon freight and fares in respect of goods and passengers carried on any ships, whether British or foreign, between Commonwealth ports, would be held to be void and inoperative.
  12. I shall be glad if the Solicitor-General will be so good as to furnish me with his opinion in the matter.
  13. As the question has been listed for consideration by Cabinet at an early date, it is requested that I be favoured with a reply at the earliest possible moment.

The industrial laws of the Commonwealth and the States regulate the wages of seamen on the Australian coast but these laws can only operate on ships which trade solely between Australian ports.

The Navigation Act, by virtue of the powers conferred by sections 735 and 736 of the Merchant Shipping Act, makes certain provision with regard to accommodation for seamen on British ships registered in Australia or engaged in the coasting trade.

In framing the Navigation Act an attempt was made to give some protection against unfair competition in the coasting trade by British or foreign ships and therefore certain conditions were imposed by the Act on all ships engaging in the coasting trade.

The gist of the provisions is that no ships shall engage in the coasting trade unless licensed to do so, and that licences are issued subject to compliance on the part of the ship with certain conditions as to the wages and accommodation of the crew; these conditions being in substance that the wages paid should be the current rates ruling in Australia, and the accommodation being the same as would be required on a British ship registered in Australia on engaging in the coasting trade.

The proposal of the Royal Commission on the Navigation Act, as I understand it, is that this mode of protection should be abolished and that there should be substituted for it a system of a tax or tariff per ton of goods or per passenger carried interstate or between different Australian ports in the same State; tax to be levied only in respect of goods or passengers carried in ships which did not comply with Australian conditions as to wages and accommodation.

I know of no reason for the assumption that the duties suggested were not intended to be imposed with respect to ships registered in the Commonwealth. It seems to me that the intention was to distinguish not between the ships of different parts of the British Dominions but between ships which did or did not comply with a certain standard as regards wages and accommodation.

To such a scheme there could be no objection on the ground that it did not treat all British ships in the same manner as British ships registered in Australia.

As to the question whether the scheme might conflict with the treaty rights of any foreign State there is no need to advise unless reference is made to some particular treaty which is claimed to confer rights inconsistent with the scheme.

As regards section 92 of the Constitution, it has now been decided by the High Court in the case of W & A McArthur v. Queensland, 28 C.L.R. 530, that section 92 is a prohibition directed against the States and does not in any way limit the powers of the Commonwealth.

The suggested proposal is based upon the taxation power of the Commonwealth and I know nothing in the constitution to prevent its being carried into effect.

It might be contended that such a tax would be invalid under the principle of Barger’s case 6 C.L.R. 41, as not being really a tax, but an attempt to regulate by a penalty in the guise of a tax, as a matter within the domestic control of the States.

But, in the first place, it is very doubtful how far, in view of the Engineers’ case,2 Barger’s case (in which Justices Isaacs and Higgins, the only two surviving of the Justices then comprising the Court), is still law.

And, in the second place, I think that the proposed tax is distinguishable from Barger’s case on grounds which make that case quite inapplicable.

In Barger’s case, the majority of the Court found that it was apparent, on the face of the Act, that the real object of the Act was to regulate wages and industrial conditions, and that the so called excise duty was in reality a penalty imposed for non-compliance with the wages and industrial conditions set out in the Act.

In the case of the proposed tax, I do not think that the Court can reasonably find that the tax was a penalty of that kind, or was, indeed, anything but a valid exercise of the taxing power.

For more detailed information as to my views on the subject I would refer to my evidence before the Royal Commission upon the effect of federation upon the finances of Western Australia–questions 5432 to 5441, pages 545 and 546 of the printed evidence.

[Vol. 23, p. 486]