BARLEY ACQUISITION acquisition of barley: ACQUISITION ON just terms: CALCULATION OF JUST TERMS: RELEVANCE OF PRE-WAR PRICES: RELEVANCE OF IMPACT OF WAR ON SUPPLIER’S BUSINESS: RELEVANCE OF PRICE OBTAINED BY BARLEY BOARD: significance of CLAIM BY SUPPLIERS TO HAVE PRODUCED BARLEY FOR SPECIAL MARKET WHICH HAD NEVER BEEN OVER-SUPPLIED
Constitution ss 51(xxxi): Australian Barley Board Regulations reg 16
The Secretary, Department of Commerce, has forwarded for my advice the following memorandum:
A letter as follows has been received from the Primary Producers’ Association of Western Australia concerning barley acquired from M.O.R. and I.B.R.
I have been instructed by Messrs. M.O.R. & I.B.R. of Coorow, Western Australia, members of this Association, to make application to you for compensation for 2,461 bushels of superior chev. barley acquired from them by the Barley Board constituted under the authority of the Commonwealth Government.
For years past the claimants have been supplying the Union Maltings Pty. Ltd., Perth and have gone to considerable trouble and expense in producing a type suitable for that firm’s requirements. Indeed they have established for themselves a local market which has never yet been over-supplied, and the quality of the barley produced has been such that the Company has encouraged them to go in for production on much more extensive lines.
It is usual for the claimants to deliver their barley to the company and receive payment of from £500 to £600 towards the end of November. On this occasion their delivery was made, but it was not until a few days ago that an advance of 1/3d per bushel (approximately one-third of the value of the barley) was made to them.
I am sure you will appreciate the difficulty in finance arising out of a payment in February of £150, when the usual payments at the end of November have been about £500. The claimants do not deny the powers of the Government to acquire the barley, but they do insist that such acquisition must be on just terms.
In support of this contention, they quote section 51 of the Commonwealth Constitution:
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to:
(xxxi) The acquisition of property on just terms from any State or person for any purpose in respect of which Parliament has power to make laws:
It is claimed that ‘just terms’ in this case cannot be other than the price at which Union Maltings Pty. Ltd. was prepared to pay for the barley which the claimants grew for the Company on order.
I am enclosing herewith a statement setting out prices received from the company mentioned over the past few years, and can further vouch that the company was prepared to take all the barley of the type produced by them. Indeed, during this season, the company suggested that they should extend their production, as the demand in this State was considerably in excess of that type of barley produced. The fact has also been established that the barley actually produced by the claimants and delivered to Union Maltings Pty. Ltd. has been sold by the Board to that company for 4/3d. per bushel. This in itself is sufficient proof of the justice of this claim for compensation, and I would be glad if early settlement on that basis can be made.
The Chairman of the Australian Barley Board has commented on this as follows:
I am in receipt of your letter of 22nd February, together with letter received from the General Secretary of the Primary Producers Association of West Australia, subject matter being barley delivered by Messrs. M.O.R. and I.B.R. of Coorow, West Australia.
The position outlined by the Secretary is undoubtedly according to fact in so far that the Australian Barley Board has sold barley to maltsters in West Australia at 4/3 per bushel on rails Perth, and M.O.R. and I.B.R.’s barley was portion of that sold.
Under Barley Acquisition Regulations the Commonwealth Government has acquired all barley and therefore R. are no longer the owners. These people are requesting that because the Board has sold barley at 4/3 per bushel that it is sufficient proof of the justice of their claim for payment on this basis. Messrs. R. have overlooked the fact that there is a surplus of No. 1 quality barley in Australia and so far only portion of this barley has been sold, so it is impossible to say what will be the nett realisation price for the grade of barley that they have grown.
Clause 16(1) of the Barley Acquisition Regulations reads as follows:
Upon delivery or consignment of any barley in accordance with regulation 13 of these Regulations every person having any right or interest in that barley may forward to the Board a claim for compensation in accordance with Form B in the Schedule to these Regulations and shall be entitled to be paid such amount of compensation as the Minister, after taking into consideration the recommendation of the Board, determines.
and (2) states:
It will not be necessary for the Minister to make a determination in pursuance of sub-regulation (1) of this regulation until, in his opinion, a sufficient quantity of any barley acquired by the Commonwealth has been disposed of to enable the Board to make a just recommendation, but the Minister may, in his absolute discretion, make any payment on account of any claim notwithstanding that no determination in respect of that claim has been made.
The Board has recommended to the Minister the payment of 1/3d per bushel for first grade 2-row type, 1/-d for second grade 2-row type and first grade 6-row type, and 9d for lower grades, and the Minister has confirmed these rates in advance.
As Mr. Prater has referred to the Constitution, this matter might be referred to the Attorney-General’s Department before a reply is finally submitted.
I return herewith the letter and figures submitted by Mr. Prater.
All barley acquired by the Commonwealth has been pooled, and it is intended to distribute the proceeds, after deduction of expenses, on a pro rata basis to growers with suitable margins according to grades of barley.
It is not likely that the distribution will amount to 4/3d per bushel for No. 1 quality barley, or that an average price of 4/3d per bushel for No. 1 quality barley will be received.
I should be glad if you would advise me whether the contention of the growers that they are entitled to compensation on the basis of the price received for the actual barley delivered by them is correct.
Regulation 16 of the Australian Barley Board Regulations is as set out in the memorandum.
Placitum (xxxi) of section 51 of the Constitution empowers the Parliament to make laws, subject to the Constitution, for the peace order and good government of the Commonwealth with respect to ‘the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws’.
In Opinion No. 18 of 1940(1) I advised that the acquisition of wheat under the Wheat Acquisition Regulations (which so far as is here material are similar to the Australian Barley Board Regulations) must in each case be on just terms. That advice applies also to the acquisition of barley.
Normally in the acquisition of property by the Commonwealth the market value of the property prior to acquisition would be a dominant factor in arriving at a just pecuniary compensation. There are, however, other factors and this is particularly so in a scheme such as that relating to barley where practically the whole of the Australian crop has, by reason of the effects of the war, been acquired and is being marketed under regulation.
In so far as the persons from whom the barley was acquired contend that the price they have hitherto received indicates what just terms should be in their case, I do not agree. This contention ignores the possible effects that the war would have had on their business and it is, of course, obvious that but for the effects of the war there not only would have been no barley scheme but such a scheme would probably have been beyond the powers of the Commonwealth.
Nor does the fact that the Australian Barley Board is still obtaining the same price in the same market for the sale of these particular parcels of barley indicate that that price is just terms within the meaning of the Constitution. This factor, in my opinion, merely indicates the success of the efforts of the Board to stabilize the price of barley and does not necessarily mean that that same price would have been secured had there been no barley scheme.
The price which the person from whom the barley was acquired hitherto obtained and the price which the Barley Board now obtains for that barley may conceivably be some evidence of what are just terms but so far from being conclusive evidence I am of the opinion that they are not even evidence of substantial weight.
I think the R. Brothers argue with better chance of success, however, when they point out that they produce a special type of barley for a special market which has never been over-supplied. This, I consider, is a factor to which considerable weight must be given when determining what constitutes just terms. If A produces a special type of barley for an under-supplied market whilst B produces an average type of barley for an over-supplied market and A and B receive the same amount of compensation then, all other factors such as distance from market and transport being equal, I feel that the conclusion is inescapable either that B receives something more than just terms or A receives less and, if A does receive less than just terms, I think he would have an action against the Commonwealth for the balance.
[Vol. 33, p. 106]
(1) See Opinion No. 1662.