Opinion Number. 1577

Subject

WHEAT MARKETING: compulsory pool
WHEAT MARKETING: creation of compulsory pool: powers of states: powers of commonwealth: trade and commerce power: creation of monopoly: acquisition of property: just terms: creation of board with federal and state powers

Date

We have been asked to advise as to the power of the Commonwealth to legislate for a compulsory pool in respect of wheat produced in Australia. The first question is framed in general terms and asks whether there is power in the Commonwealth and State Constitutions to provide, by legislation by the Commonwealth and the States, for the establishment of a compulsory pool or compulsory pools for the handling and marketing of wheat produced in Australia. By the expression ‘compulsory pool’ we understand that what is meant is some system of collective marketing on the lines of what is done in New South Wales under the marketing of primary products Acts, and what was done in Queensland under the corresponding Acts prior to the decision in the Peanut Case. Another illustration of legislation for such a compulsory pool for wheat is to be found in the Wheat Marketing Act 1920 N.S.W., and another illustration is to be found in the Wheat Bill (Commonwealth) passed by the House of Representatives in or about April or May 1930 but subsequently rejected by the Senate. The pool may be made compulsory either after a majority vote of producers which binds the minority or by direct statutory provisions without any poll.

In our opinion, if the States or some of them were to surrender to the Commonwealth under placitum (xxxvii) by ample and appropriate legislation, all the legislative powers of such States in respect of the matter now being considered, then the Commonwealth would be clothed with power to legislate for a compulsory pool in respect of all wheat produced in the States, so surrendering their powers to the Commonwealth.

The States clearly have power to make compulsory pools in respect of the marketing of wheat within the ambit of their legislative powers, and this means that the States can create compulsory pools for the marketing of wheat in intrastate trade and in any other trade so far as such pools would not bring the State legislation into conflict with section 92 of the Constitution or with any overriding Commonwealth legislation. Whether the State Acts, as now framed, are or are not constitutional, we do not think there can be any doubt about the power of the States within the ambit of their legislative powers to create a compulsory pool.

We turn now to see what are the Commonwealth’s powers to legislate for such compulsory pools.

The Commonwealth has power to legislate in respect of trade and commerce with other countries and among the States. In our opinion legislation for the formation of a compulsory pool for handling and marketing wheat dealt with in interstate and foreign commerce would fall within the description of legislation in respect of such trade and commerce. It appears to us that an Act to provide that wheat for purposes of interstate and foreign trade should only be sold through the agency of a statutory board and should be paid for by such board out of the average price resulting from the pooled sales of wheat, falls naturally within the description of legislation in respect of such trade and commerce. If, therefore, the powers of the State which are plenary within its ambit are, by virtue of placitum (xxxvii) of section 51 added to the powers of the Commonwealth which are plenary within its ambit, then the Commonwealth would thus become possessed of a totality of power which would cover the whole field of all trade in wheat, and would make the Commonwealth Parliament competent, so far as the transferred powers extended, to enact legislation for the purpose now being discussed. We have only answered the question in broad outline and are not in a position to consider the particular framework of the legislation which might be introduced to bring a compulsory pool into existence.

There is, however, one feature which we ought specially to mention. In some legislation a characteristic feature has been to divest the property of the product from the grower or producer and vest it in the board. We do not think, however, that this is an essential feature of every compulsory pool and, in fact, in the Wheat Marketing Act 1920 (N.S.W.) which operated in conjunction with pools in other States, there was not any such divesting of property.

We don’t think that any great difficulty would be found in introducing appropriate legislation without that element. The Commonwealth Bill of 1930 had no divesting clause. We are not able to advise confidently that the Commonwealth, either with or without a transfer of powers from the States, could exercise the power of divesting the property from the producers in connection with legislation for a compulsory pool. The express language of placitum (xxxi) of section 51 imposes upon the Commonwealth the obligation in any case of acquisition of property for any of the purposes for which the Commonwealth can make laws, only to acquire on just terms. This means that the Commonwealth could not by its legislation prescribe that the grower was to receive the average pooled price because the grower is in a position to say that he is entitled to the Court’s examination of the question and to get just terms, that is to say, proper compensation. This means that no Commonwealth legislation could prescribe the amount to be paid for compensation which is always subject to examination by the Court. This seems to us to create a great obstacle in the way of a pool which would be formed to give the grower his share of the pool price which might vary from time to time and be delayed or postponed for very long periods. We will return later on to some further observations on this aspect of the right of the Commonwealth to acquire the property in the wheat for the purposes of trade.

The next part of the questions as asked is the question whether it would be possible for the Commonwealth to legislate for the establishment of a compulsory pool for all wheat, the subject, or intended to be the subject, of interstate or foreign trade, and for the State to legislate for a compulsory pool for all wheat, the subject, or intended to be the subject, of intrastate trade. It is quite obvious that the States could by appropriate legislation, create a compulsory pool for all wheat coming into the field of intrastate trade. As in our opinion the formation of such a pool comes within the trade and commerce power of the Commonwealth, it follows that in our view the Commonwealth could also legislate for a compulsory pool in respect of all wheat coming within the field of interstate or foreign trade.

We have avoided the use of the expressions ‘wheat intended to be the subject of intrastate trade’ and ‘wheat intended to be the subject of interstate or foreign trade’. There is some difficulty in these expressions because a man’s intention may vary from time to time. This sort of expression is used in the New South Wales Marketing of Primary Products Amendment Act 1934, but steps are taken in that Act to deal with the difficulty arising from the indefiniteness. However, this is a matter of detail and not a matter of principle, and there is no need to deal with this matter further at this juncture when we are considering the question on broad principles. Whilst we think that in the abstract the Commonwealth could form a pool within its field of trade, and the State could form an independent pool within its field of trade, we are not in a position to offer any opinion as to the practical results if such pools were to work independently of one another and without being subject to some common control.

The next part of the question asks in the alternative whether it would be possible for the Commonwealth and the States to create a body which could invoke both Commonwealth and State authority.

We are not quite sure that we understand exactly what is meant in this alternative question but we assume that what is intended to be asked is whether there could be one pool or board deriving its authority in respect of interstate and foreign trade from the Commonwealth and in respect of intrastate trade from the States. That is to say, would it be possible for the Commonwealth by a Commonwealth Act to create a board to deal with interstate wheat and foreign wheat, and would it be possible for the State to grant legislative authority to that same Board to deal also with intrastate wheat. We think this would be possible and probably this might be more acceptable to the States than the surrender of their powers under placitum (xxxvii) of section 51. This system of co-operation appears to have been indicated in the Wheat Marketing Act 1920 (N.S.W.) section 4. But we have not developed any final view as to whether, under such circumstances, the board deriving authority to deal with the interstate and foreign trade from the Commonwealth and deriving authority to deal with the intrastate trade from the State, would not have to administer two separate pool accounts and pay in separate pool prices. In the answers which we have given we have assumed that the law still is that section 92 does not bind the Commonwealth. If it were ultimately to be held that section 92 binds both Commonwealth and States, then no pool could be formed so as to interfere with freedom of interstate trade.

We desire to say a word or two more on the right of the Commonwealth to divest the property in wheat from the owners for the purpose of itself engaging in interstate or foreign trade in such wheat. We assume for this purpose that the Commonwealth submits to the obligation to grant the dispossessed owners just terms, that is to say, reasonable compensation for being deprived of their property. The question then arises whether it is within the trade and commerce power for the Commonwealth to dispossess all traders of their products and to prohibit all trade in interstate and foreign commerce to all traders and to take to itself a monopoly of all interstate and foreign trade by monopolising the product which is the subject matter of the trade. Of course, this is generally the way in which the State pools work, but the State legislature has got sovereign powers except so far as it is controlled by the Commonwealth Constitution or Commonwealth legislation. At the moment we have not had sufficient time to formulate our views on this question whether under its trade and commerce power the Commonwealth could legislate to take all the product and stop everyone else trading and grant itself a monopoly. We have already indicated that we do not think this is an essential element in the formation of a pool.

[Vol. 28, p. 92]

(1) Ernest Meyer Mitchell. Born 12 February 1875, Wynyard Square, NSW; died 21 April 1943, Sydney, NSW. Admitted NSW Bar 1900. Lecturer in law, University of Sydney 1907–1916. Australian Imperial Force 1916–1919, 4th Battalion and 1st Machine Gun Battalion. Australian Army Legal Division 1919–1926; promoted Lieutenant-Colonel 1924. Appointed KC 1925. Member, NSW Legislative Council (United Australia Party) 1933–1943.

(2) Sir Frank Walters Kitto. Born 30 July 1903, Melbourne, Victoria; died 15 February 1994, Armidale, NSW. Admitted NSW Bar 1927. Lecturer in law, University of Sydney 1930–1933. Appointed KC 1942; to Privy Council 1963. Justice, High Court of Australia, 1950–1970. Appointed KBE 1955; AC 1983. University of New England, Deputy Chancellor 1968–1970; Chancellor 1970–1981. Inaugural Chairman, Australian Press Council 1976–1982.