Opinion Number. 1645

Subject

FOOD CONTROL CONTROL OF FOODSTUFFS IN TIME OF WAR: POWERS OF ACQUISITION OF EXPORT CONTROL BOARDS: acquiSITION OF ownership of products either as agents for British or Commonwealth Governments or for sale to them: DEFENCE POWER: ACQUISITION OF PROPERTY ON JUST TERMS: FREEDOM OF INTERSTATE TRADE

Key Legislation

Apple and Pear Organization Act 1938 s 13(2): Constitution ss 51(vi),(xxxi), 92, 112

Date
Client
The Secretary, Department of Commerce

The Secretary, Department of Commerce, has forwarded the following memorandum to me for advice:

I desire to inform you that Food (Defence Plans) Department of the British Board of Trade has drawn up plans to meet emergency conditions which may arise from an outbreak of war.

The proposals embody the appointment of a Food Controller who, immediately upon the outbreak of war, would control supply, distribution, and consumption of foodstuffs.

The methods of acquirement contemplated are as under:

  1. Immediate issue of Orders requisitioning–
    1. all food stocks in the United Kingdom,
    2. all shipments as they arrive.
  2. Purchases overseas of foodstuffs for Military and Naval forces, and to supplement United Kingdom production in meeting the needs of civilians.

Australia, as a large exporter of staple foods to the United Kingdom, is interested in the phase of acquirement and control set out in paragraph (2). The products which will come within our province of supply will be–

  1. Wheat and flour,
  2. Meat,
  3. Butter and cheese,
  4. Eggs,
  5. Sugar,
  6. Dried fruits,
  7. Canned fruits.

Confidential discussions were had in London with Sir Robert French (Director of the Food–Defence Plans–Department) by Sir Earle Page and myself, and further consultations are proceeding in Australia through the High Commissioner for the United Kingdom.

The Food Controller will obtain his stocks of imported foods through acquisition by any of the following–

  1. Bulk purchase on long term contracts (cereals, meat, dairy produce &c.), or
  2. Where bulk purchase is not feasible, by private firms operating on account of the Food Controller.

It is assumed that the procedure forecasted in paragraph (1) would be applied to the principal export products of the Commonwealth mentioned above.

For the time being, conclusions in regard to the following broad aspects await negotiations between the British and Commonwealth Governments–

  1. Whether the British Government shall acquire the products,
  2. Whether the Commonwealth Government shall acquire the products–
    1. for sale to the British Government, or
    2. as agent for the British Government.
  3. In respect of (1) and (2)(b) where ownership shall pass, i.e. whether in Australia at centralized stores, and/or in situ, or on shipment &c.
  4. Financial arrangements in regard to acquirement, storage, transportation and insurance.

As the proposals of the Food (Defence Plans) Department connote a shadow form of organisation to be operated immediately war breaks out, it is desirable that the Commonwealth Government should evolve complementary measures for the same purpose.

In the course of negotiation now proceeding as already stated, Sir Henry French has enquired whether the Export Control Boards would be competent bodies to exercise war-time control under a scheme or policy of requisition. He has also asked for some indication as to the channel through which contracts for the purchase of each of the commodities mentioned could most readily be arranged during the first few days or weeks after the outbreak of hostilities.

He has been tentatively informed–

  1. That the Export Boards for meat, butter and cheese, dried fruits and canned fruits would, it is anticipated, be in a position to carry into effect, by arrangement through the Commonwealth Government, any proposals put forward by the British Government for the taking over of foodstuffs in time of war.
  2. That the same may be said of sugar industry, the organisation of which lends itself readily to adaptation to the form of emergency measures proposed,
  3. That Committees for fresh fruit and eggs will be set up shortly.
  4. That it will be necessary to form a special Committee to deal with wheat and flour, and that it was proposed to take this action at an early date.

Ad hoc Committees representative of the meat, dairying, dried fruits and canned fruits industries have already been called into conference by the Minister mainly to consider the question of taking stock of the storage space (refrigerated and otherwise) available to meet the requirements of each industry should shipping be held up and exports cease for a period of, say, two months. A survey of these resources is now being made.

During the course of the discussions, however, the question was raised as to the powers of the respective Boards in relation to any scheme of war-time requisition by Governmental authority of their products. As it is desirable that the Commonwealth Government should be prepared to take immediate action in line with the war-time measures of the British authorities, I am directed to ask that you will be good enough to furnish an advising as to–

  1. The adequacy of the present powers of the existing Export Control Boards to assume or acquire ownership, if desired, of the products handled by them, either as agents for the British or Commonwealth Governments or for sale to them,
  2. What additional powers are necessary to invest them with ownership and control of their respective products, by means of urgent amendments of each respective Statute, or
  3. Whether some comprehensive measure could be prepared in draft (ready to introduce to Parliament on the outbreak) for vesting in all Statutory Export Boards the property and control of the commodities handled by them.

From the point of view of the expeditious assumption of control and practical considerations of administration during war-time, the use of existing Statutory Boards in this manner would appear to be the most acceptable procedure.

It should perhaps be mentioned that, since the Privy Council issued its judgment in the James case, the proportion of export of primary products from each State has been subject to quota fixed by State legislation. The acceptance of a proportion of the export trade as between States has been achieved by a form of agreement between producers and/or manufactures to attorn, so to speak, to the State quota conditions by refraining from selling interstate.

This fact is mentioned in order to suggest that it may be necessary to consider, from the constitutional point of view, separate legislative action on the part of each State, as contrasted with Commonwealth legislation in the form suggested in paragraph I.

Even if Commonwealth legislation be competent to deal with the matter, it will probably be necessary for administrative purposes to have State Sections of any Federal body appointed to manage the war-time control under a scheme of acquisition by any Government. It may be, of course, that war-time conditions strengthen the sovereignty of the Commonwealth Government in this respect and these comments raise merely abstract considerations.

On the other hand, all export products do not form part of the overseas trade of all States, and it is remembered that the acquisition of meat by State enactment (in New South Wales and Queensland) and wheat (in New South Wales) during the last war was the subject of litigation before the High Court.

I attach hereto list of Export Control Boards operating under Commonwealth Statutes, together with details of the Sections of the respective Acts setting out their powers.

The first question I am asked to consider is as to ‘the adequacy of the present powers of the existing Export Control Boards to assume or acquire ownership ... of the products handled by them, either as agents for the British or Commonwealth Governments or for sale to them’. It should be noted that the acquisition of goods by an Export Control Board as agent on behalf of the British or Commonwealth Government would not mean that the ownership of the goods would pass to the Board, so that this question really involves consideration of two matters–first, the power of the Boards to act as agent of the British or Commonwealth Government for the purchase of goods, and, secondly, the power of the Boards themselves to acquire the ownership of goods.

The various Export Control Boards are created by Statutes which define their powers; they have no powers other than those expressly or impliedly conferred by the Statutes creating them. Generally speaking, they have been created for the purpose of controlling, by a system of licence, the export, and the sale and distribution after export, or various kinds of primary produce. In the case of the Australian Canned Fruits Board, the Australian Dairy Produce Board, the Dried Fruits Control Board and the Australian Wine Board, power is conferred to accept control of goods placed under the control of the Board for the purposes of the relevant Act. No such provision has been made with respect to the Australian Meat Board or the Australian Apple and Pear Board. The latter Board is prohibited, except as otherwise expressly provided, from buying or selling apples or pears or engaging in trade (Apple and Pear Organization Act 1938, s. 13(2.)). It will be seen that none of the Boards has power to act as agent in the purchase of goods for the British or Commonwealth Government or itself to purchase goods.

Under placita (vi.) and (xxxi.) of section 51 of the Constitution, the Parliament is empowered, subject to the Constitution, to make laws with respect to the naval and military defence of the Commonwealth and with respect to the acquisition of property on just terms for any purpose in respect of which the Parliament has power to make laws. In my view, the defence power so conferred is wide enough to enable laws to be made authorizing the acquisition during wartime by the Commonwealth of foodstuffs for sale to, or on behalf of, the British Government. Furthermore, this power may be exercised through such agencies, including the Export Control Boards, as the Commonwealth chooses to employ for the purpose.

The power to make such laws is, however, expressed to be subject to the Constitution, and it is necessary to consider whether a law providing for the compulsory acquisition of goods would infringe section 92 of the Constitution. In James v. Cowan (47 C.L.R. 386) the Privy Council expressed the opinion that, if the acquisition were not directed against interstate trade and commerce but were for defence purposes, the law would be valid. In this case, the validity of a State Act which gave to the State powers of compulsory acquisition which were exercisable by means of orders was considered by the Privy Council. In dealing with the validity of such orders, Lord Atkin said, at page 396–

On the second contention, namely, that the orders made by the Minister were invalid because they infringed sec. 92, in their Lordships opinion the plaintiff is entitled to succeed. Starke J. appears to have decided this part of the case by reference to the decision of Griffith C.J. in New South Wales v. The Commonwealth ((1915) 20 C.L.R. 54), generally known as the Wheat Case. This is based on the view that sec. 92 does not affect powers of acquisition, which, it is said, merely change the ownership, and do not regulate the disposition of goods by the owner. In substance it means that the Crown becomes the owner, and the Crown can do what it pleases with its own, dispose of it interstate or not as it chooses. This doctrine was repudiated by counsel for the defendants. Their Lordships would not be prepared to assent to it stated in the simple form which commended itself to Griffith C.J. If the real object of arming the Minister with the power of acquisition is to enable him to place restrictions on interstate commerce, as opposed to a real object of taking preventive measures against famine or disease and the like, the legislation is as invalid as if the Legislature itself had imposed the commercial restrictions. The Constitution is not to be mocked by substituting executive for legislative interference with freedom. But in the present case the Courts are not faced with the problem of construing an Act of the Legislature which contains no reference to sec. 92. In this case the powers given to the Minister are expressly conditioned as subject to the section. Sec. 28 appears to mean that the Minister may acquire compulsorily so that he does not interfere with the absolute freedom of trade among the States and acquires for the purposes of the Act. Thus the only question in this case appears to be whether the Minister did exercise his powers so as to restrict the absolute freedom of interstate trade. It may be conceded that even with powers granted in this form, if the Minister exercised them for a primary object which was not directed to trade or commerce, but to such matters as defence against the enemy, prevention of famine, disease and the like, he would not be open to attack because incidentally interstate trade was affected.

Further consideration was given to the meaning of section 92 by the Privy Council in James v. the Commonwealth (55 C.L.R. 1). In the course of the judgment, consideration was given to several State Acts providing for the expropriation of property, and reference was made to the decision in James v. Cowan (supra). The views of their Lordships as to the meaning of the requirement that interstate trade shall be free were summed up in the following terms (at page 58):

The true criterion seems to be that what is meant is freedom as at the frontier or, to use the words of sec. 112, in respect of ‘goods passing into or out of the State.’ What is meant by that needs explanation. The idea starts with the admitted fact that federation in Australia, was intended (inter alia) to abolish the frontiers between the different States and create one Australia. That conception involved freedom from customs duties, imports, border prohibitions and restrictions of every kind: the people of Australia were to be free to trade with each other and to pass to and fro among the States without any burden, hindrance or restriction based merely on the fact that they were not members of the same State. But it has become clear from the various decisions already cited that such burdens and hindrances may take diverse forms, and indeed appear under various disguises. One form may be a compulsory acquisition of goods, as in James v. Cowan ((1932) A.C. 542; 47 C.L.R. 386), or the Peanut Case ((1933) 48 C.L.R. 266), if in truth the expropriation is directed wholly or partially against interstate trade in the goods, that is, against selling them out of the State.

The views expressed in the foregoing cases relate to State Acts, but, in my view, similar considerations are applicable to Commonwealth Acts. I am accordingly of opinion that a law providing for the compulsory acquisition of property for defence purposes would not be invalid as infringing section 92.

The second and third questions submitted for advice may conveniently be considered together. Upon receipt of precise instructions as to what is desired, draft legislation could be prepared conferring power on the various Boards to acquire, or to act as agent in the acquisition of, goods. Whether one Bill or a series of Bills would be more suitable could not be determined until particulars of the provisions required had been furnished to me.

[Vol. 32, p. 155]