I have received the following memorandum from the Secretary, Department of Fuel, Shipping and Transport, for advice:

The Government is at present considering the possibility of its continuing to operate Commonwealth owned and chartered vessels which are at the moment being operated by the Australian Shipping Board, constituted under the National Security (Shipping Co-ordination) Regulations.

These Regulations, it is understood, will lapse at the end of the current year. The Shipping Act, 1949, provided, inter alia, for the setting up of an Australian Shipping Board which, it was intended, would operate the Commonwealth Shipping Line. It was also intended that when this Act came into force, the National Security (Shipping Co-ordination) Regulations would be repealed. The Shipping Act 1949, however, has not been proclaimed.

The present Government does not wish to proclaim the Shipping Act 1949, nor does it desire to introduce any special legislation to provide for the setting up of a Board or other Authority to operate Commonwealth owned and chartered vessels.

It would be appreciated if you could advise me whether, in the absence of any legislation, arrangements could be validly made for the operation by the Commonwealth of vessels in the interstate or overseas trades, and of the form such arrangements might take.

(2)  I have come to the conclusion, but not with complete confidence, that, in interstate or overseas trade, the Commonwealth Government could validly operate through the appropriate Department, vessels owned and chartered by the Commonwealth, subject only to the provision by Parliament of funds specifically for that purpose, and perhaps the assignment to the Department, by order under section 64 of the Constitution, of the function of operating such vessels.

(3)  The form of any operating arrangements would depend upon the nature of the proposed services, which would need to be carried on under Cabinet or Ministerial approval as a part of the activities of the appropriate Department. The approval could cover such matters as the services to be conducted (including conditions as to freight charges, fares and the like), staffing arrangements, purchase of vessels, equipment and stores, and financial arrangements generally.

(4)  The matter for advice is not altogether novel, as the Commonwealth did, in fact, conduct a shipping service for some years prior to 1923 without any apparent legislative authority at all.

(5)  I understand the intention is that the shipping service should be operated as a function of the Department of Fuel, Shipping and Transport, so that the operator of the ships will be the Commonwealth of Australia.

(6)  As I understand the proposals, the chief executive officer of the shipping service will be the General Manager, and the policy to be pursued in operating the ships will be determined by a departmental committee consisting of the Secretary of the Department, the Assistant Secretary (Shipping), the Assistant Secretary (Finance), and the General Manager, acting of course under the directions of the Minister. It must be emphasized at the outset that such a committee could, of course, have no separate existence as a legal entity, as has the Australian Shipping Board under the National Security (Shipping Co-ordination) Regulations. Both the members of the committee and the General Manager will be at all times public servants who will act and make decisions on behalf of the Commonwealth.

(7)  I further understand that the present intention is to operate the ships mainly for the carriage of cargo only, and that the operations of the ships will be confined to interstate trade and such intrastate trade as is incidental to engaging in interstate operations. But the same considerations would apply to operating the ships for services between any port in a State and any port in a Territory, any port in a Territory and any other port in a Territory, and any port in a State or Territory and any overseas port, if it were desired to extend the service in any of these directions.

(8)  In order to establish, maintain and operate any such services it may be necessary—

1.  to acquire, either by transfer, purchase, or lease, ships, buildings, plant, equipment, stores and the like;

2.  to engage officers, seamen and civil employees;

3.  to appoint agents; and

4.  to make contracts of affreightment.

(9)  The question is whether, and if so in what form, legislative authority is necessary to permit all these acts to be done by a Government Department on behalf of the Executive Government.

(10)  The Constitution uses only very broad and general terms in sketching the executive power of the Commonwealth, and the scope of the executive power has been less fully delimited by judicial decision than has the scope of either the legislative or the judicial power. The question stated in paragraph 8 above has not been clearly or unequivocally answered, one way or the other, by any decided case. Recent judicial decisions suggest that the scope of the executive power in what may be called commercial matters is perhaps wider than was formerly supposed; but it is going too far to say that this has been definitely so decided. I make clear therefore that the opinion expressed above is one that is based on general reasoning, in a field beset with many conflicting judicial views, and that my conclusion cannot be regarded as free from uncertainty.

(11)  A basic rule of the Constitution with respect to the activities of the Executive Government is that the necessary funds must be appropriated by Parliament. A Parliamentary appropriation is as much a law of the Commonwealth as any other statute.

(12)  The Commonwealth Parliament can appropriate moneys ‘for the purposes of the Commonwealth’, and for the purposes of the Commonwealth only. (Constitution, section 81). So far as concerns the present matter, this may be taken to mean purposes in respect of which the Parliament has power to make laws. (Pharmaceutical Benefits case (No. 1) 71 C.L.R. 237).

(13)  Subject to the Constitution, and to the appropriation of the necessary funds, what Departments there shall be and what functions they shall perform seem to me to be a matter for determination by the Governor-General (Constitution, section 64).

(14)  Subject again to the appropriation of the necessary funds, the Commonwealth can constitutionally engage in interstate trade and commerce (which specifically includes shipping).

(15)  This can be done by means of statutory authorization, or by an exercise of executive power. If it were desired to create a corporation to conduct the service, legislation would definitely be necessary. If, however, it is intended to rely on the executive power and to conduct the services departmentally, the Executive would have to determine that it shall be a function of the Department of Fuel, Shipping and Transport to establish and conduct interstate, overseas and territorial shipping services, but the only legislative authority which would be required would be a Parliamentary appropriation to enable any necessary funds to be expended.

(16)  As already mentioned, I do not think any judicial decision can be claimed to be directly in point. But I do not think the conclusion just stated is inconsistent with any of the decided cases.

(17)  I make the following comments on the relevant cases in the High Court:

(a)  In the Clothing Factory case in 1935 (Attorney-General for Victoria v. Commonwealth, (52 C.L.R. 533)) the Court upheld the Commonwealth’s power to carry on a clothing factory, not only to supply the Commonwealth’s own needs but to supply civilian demand as well. But this case is of little assistance for present purposes. The conduct of the factory for defence purposes was specifically authorized by statute, and the general commercial activities of the factory were upheld as purely incidental to its defence functions.

(b)  In the Wool Tops case in 1922 (31 C.L.R. 421), a contract under which a company carried on the whole of its activity as agent for the Commonwealth, in consideration of the payment to it of part of the resultant profits, was held to be invalid as outside the Executive power of the Commonwealth. But that case again is not directly in point for present purposes. There was no Parliamentary appropriation authorizing the payment by the Commonwealth to the company of the agreed share of the profits.

(c)  In Commonwealth v. Colonial Ammunition Co. Ltd in 1923 (34 C.L.R. 198), some of the Judges held that, notwithstanding the subsequent appropriation by Parliament of funds for the purpose, an agreement by the Executive Government for a lease of an ammunition factory was invalid. This decision may appear at first sight altogether inconsistent with the conclusion I have indicated above. But here again the decision turns out on examination to rest on the presence of special features which are not relevant for present purposes. The Defence Act would clearly have authorized the activity concerned, but would have required an Order in Council for the purpose, and it was held that a mere subsequent appropriation was not sufficient to enable the Executive to dispense with the statutory procedure laid down in the Defence Act.

(d)  In Bardolph v. New South Wales in 1934 (52 C.L.R. 455), it was held that the provision of funds by Parliament for the specific activity of a tourist bureau was evidence of the Executive’s authority to engage in that activity, and the Executive had power to make such contracts as were incidental to the carrying on of the activity. This case is clearly of material assistance for present purposes. Apart from the Appropriation Acts, there was no statutory authority for the carrying on of the State tourist bureau. I should add however that, in examining the question whether the Executive Government had power to bind the Crown by the making of contracts for the purposes of the bureau, the Court attached much importance to the fact that the bureau had been carried on by the Government for so many years as to make it a part of the established services of the Executive.

(18)  In 1929, the Royal Commission on the Constitution stated in its Report (page 49) that—

the Executive has no power to enter into contracts, except such as are authorized by Parliament, and except, possibly, contracts rendered necessary in the routine administration of a Government Department, and it does not acquire that power merely because Parliament has appropriated money for the purpose of the contracts.

For these propositions the Royal Commission cited the Wool Tops case and the Ammunition Factory case as authority. The Royal Commission’s view is, of course, plainly inconsistent with the conclusion I have myself stated above. In my opinion, however, the later case of Bardolph (para. 17(d) above) shows that the earlier cases stated the rule too narrowly. But even this decision does not cover the whole ground as clearly as one would wish; for in the present matter it can definitely not be said that the conduct of shipping services has become an established part of the activities of the Department. The difference may not be material (I do not myself think it is), and in any case it would not affect any part of the proposed shipping services except the making of contracts binding upon the Crown; but I imagine that this is an essential feature of the whole plan. In my own view the power to make the necessary contracts is a mere incident in the general power to carry on the activity concerned; and on that view it would clearly be covered by the Parliamentary appropriation itself. But the point, as I have said, is not precisely covered by judicial authority.

(19)  In providing the necessary appropriation of funds, the intention should I think be clearly expressed to provide for the conduct by the Executive of a shipping service. I have in mind an appropriation which would read somewhat as follows:

To the establishment, conduct and maintenance of interstate, overseas and territorial shipping services …

Administrative staff, wages of officers and seamen, victualling stores and fuel, maintenance, purchase and charter of ships and other matters and contracts incidental to those shipping services.

(20)  It would be well also for the Administrative Arrangements Order in relation to the Department of Fuel, Shipping and Transport (see Gazette of 17 March, 1950) to be amended to express clearly that among the matters dealt with by the Department is the establishment, conduct and maintenance of interstate, overseas and territorial shipping services. The two last-mentioned items, namely, overseas and territorial shipping services, would need to be discussed with the Department of External Territories which has been assigned the function of administering shipping services to certain Pacific Islands and within the Territories of Papua and New Guinea. (See Gazette of 8 April, 1947, p. 1097).

[Vol. 39, p. 401]