Opinion Number. 1536


lease of cockatoo island dockyard lease of cockatoo island dockyard by australian commonwealth shipping board and commonwealth: power of board to ‘dispose’of property: whether lease requires ratification by parliament: obligationS of commonwealth under lease: requirement for appropriation

Key Legislation


The Secretary, Prime Minister

The Secretary, Prime Minister’s Department, has forwarded for my perusal a copy of the Agreement in respect of the leasing of Cockatoo Island Dockyard and has requested my advice on the question whether legislation by the Commonwealth Parliament is necessary in respect of the lease.

The Agreement which is dated 3rd February, 1933, and entered into by the Australian Commonwealth Shipping Board, the Commonwealth of Australia and the Cockatoo Docks and Engineering Co. Limited, is an agreement to lease Cockatoo Island (together with the dry docks, wharfs, buildings, plant, machinery, machines and apparatus specified in the schedule) to the Company for the term, at the rent and upon and subject to the covenants, agreements and provisions contained in the form of lease set out in Clause 2 of the Agreement.

Subsection (1) of section 14 of the Commonwealth Shipping Act 1923 reads as follows:

(1) All the right, title and interest of the Commonwealth in and to —

  1. the Islands situated in the Harbour of Port Jackson, in the State of New South Wales, and known as Cockatoo Island and Schnapper Island, and in and to all improvements, buildings, structures, erections, dockyards, machinery, tools, plant, craft, furniture, and fittings on those Islands respectively; and
  2. all stock on hand which at the commencement of this Act is the property of the Ship Construction Board,

are by force of this Act transferred to and vested in the Board.

Section 10 confers on the Shipping Board the power:

(d) subject to the consent of the Treasurer, to dispose of any ships, land, offices, shipyards, wharfs, or other premises required by or vested in the Board in pursuance of this Act.

This section clearly shows the intention of the legislature that the Board should, subject to the consent of the Treasurer, have the power to dispose of the property, and, in my opinion, the word ‘dispose’ includes leasing. I do not think, therefore, that further legislative action would be necessary by the Commonwealth were it not for certain provisions of the Agreement and Lease.

Clauses 4 and 11 of the Lease read as follows:

4. Should the Commonwealth Government fail to entrust Government work to the Lessee to the value of forty thousand pounds (40,000) per annum during any year of the first three years of the lease the Commonwealth will contribute towards the loss (if any) sustained by the Lessee in that year in the ratio of one pound in two pounds of that loss such contribution not to exceed in any one year Sixteen thousand six hundred and sixty six pounds (£16,666) provided that no contribution shall be payable by the Commonwealth during any such year in which the overhead expenditure of the establishment is less than twenty-two thousand five hundred pounds (£22,500).

11. THE agreement on the part of the Board contained or implied in this agreement shall be binding upon the Commonwealth and the Commonwealth shall be responsible for the observance and performance of the said agreements whether or not the Board is capable of carrying out same.

These clauses purport to impose financial obligations upon the Commonwealth in certain specified circumstances, and in order to meet such obligations it will be necessary for Parliament to appropriate moneys in accordance with section 83 of the Constitution.

In the Commonwealth v. Colonial Combing, Spinning and Weaving Co. Ltd. (31 C.L.R. 421) the High Court held that the Executive Government of the Commonwealth had no power to make or ratify certain Agreements relating to the manufacture and sale of wool tops, and Isaacs, J., (at p. 448) quoted the following extract from the judgment of the Privy Council in Mackay v. Attorney-General for British Columbia ((1922) 1 A.C., 457):

A contract which involves the provision of funds of Parliament requires, if it is to possess legal validity, that Parliament should have authorised it, either directly, or under the provisions of a statute.

In my opinion, the Commonwealth Shipping Act 1923 does not authorise the making of an agreement of the kind contemplated, and the Agreement should be ratified by Parliament.

[Vol. 26, p. 193]