Opinion Number. 279

Subject

PREFERENCE OR DISCRIMINATION BY STATE RAILWAYS CRITERIA FOR DETERMINING WHETHER CERTAIN RATES AMOUNT TO

Key Legislation

CONSTITUTION, ss. 102, 104

Date
Client
The Minister for Home Affairs

The Minister for Home Affairs asks to be advised as to the constitutionality of the railway rates referred to in the following statement:

In reply to a question asked in the Legislative Assembly, the Premier of Victoria on the 2nd instant stated that-

'The rate for the carriage of coal from Jumbunna to Melbourne is 4s 9d per ton, of which amount the consignor or consignee pays 3s 2d, and the Treasury pays the Department the balance, namely Is 7d per ton. The rate from Jumbunna to Bendigo is 10s Id per ton, of which amount the consignor or consignee pays 8s 6d and the Treasury pays the Department the balance, namely, Is 7d per ton. The rate from Jumbunna to Ballarat is 9s 3d per ton, of which amount the consignor or consignee pays 7s 8d, and the Treasury pays the Department the balance, namely Is 7d per ton. The rate for the carriage of Newcastle coal from Melbourne to Bendigo is 8s Sd per ton, the whole of which is paid by the consignor or consignee. The rate for Newcastle coal from Melbourne to Ballarat is 8s per ton, the whole of which is paid by the consignor or consignee. It may be explained, however, that coal for Ballarat is generally either sent direct from the coal mines at Korumburra or from Geelong; and the rate from Geelong to Ballarat is 4s 9d per ton, the whole of which is paid by the consignor or consignee.'

It would appear from this statement that a different rate is charged for coal found in Victoria to that imported from New South Wales.

On the 2nd August Mr Glynn, M.P. made a statement in the House of Representatives that different rates were being charged for the carriage of wool in different parts of the States. He instanced the case where N.S.W. wool is carried from Echuca to Melbourne for 25s per ton as against 42s per ton charged for Victorian wool carried over the same line. Then again wool is carried from Broken Hill to Port Adelaide for 46s 9d per ton whereas £4.13.4 per ton is charged for the carriage of wool from Oodnadatta to Port Adelaide, which is about the same distance.

The matter was referred to the Premiers of Queensland, South Australia and Victoria for consideration. No definite reply has been received from South Australia and Queensland but the Premier of Victoria has forwarded a copy of a report from the Chairman of the Victorian Railway Commissioners in which it is stated that while the particular rates referred to by Mr Glynn are accurately quoted it is considered that the modifications which have been made in the Victorian rates are such as to bring them into conformity with the provisions of the Commonwealth Constitution Act. The Commissioners say they have abolished all rates which afforded preference to Victorian products or traffic over those of other States in the Commonwealth, and included the abolition of the preference in regard to Victorian coal, blankets, flannels and woollens, and of the high rates in excess of the general mileage scale, which operated between certain Victorian stations and Serviceton with the object of restricting the free passage of goods between Victoria and South Australia. An agreement was also effected in respect of border competitive rates by which all the rates which were made for the purpose of competing against the railways of the adjoining States were withdrawn and so far as Victoria is concerned the rates on all traffic between and the adjoining States are now computed on the same basis as the rates which apply to Victorian traffic over the same line of railway, with the exception of wool and goods carried by rail between Melbourne and the Murray River ports for transport by steamer from and to the Euston and Darling River Districts. These rates are lower and are fixed with the concurrence of the other States and are regarded not as preferential but as in competition with the River. It is considered by the Railway Commissioners that the adoption of these rates is not only free from any infringement of the Commonwealth Constitution Act, but is strictly in accord with the provisions of section 102 of that Act, which provides for the due recognition of the expenditure incurred on the railways of any State.

Strictly speaking, no preferential or discriminating rate on a State railway can be unlawful, under the Inter-State Commission clauses of the Constitution, until the Parliament has legislated under section 102, and the rate has been adjudged, by a duly appointed Inter-State Commission, to be undue and unreasonable, or unjust to a State.

At the conference held between Commonwealth and State Ministers held at Hobart, in February 1905, it was resolved:

That it is desirable that the State Governments should themselves abandon all preferential or differential rates which would be abolished by an Inter-State Commission, and so save the expense of the appointment and maintenance of such a Commission.

I understand that advice is desired whether any of the rates in question are within the mischief for which, under the Inter-State Commission clauses of the Constitution, the Parliament has power to provide a remedy.

That is to say, advice is desired whether any of the rates referred to are a preference or discrimination by a State or by an authority constituted under a State, which is undue and unreasonable, or unjust to any State; due regard being had to the financial responsibilities incurred by any State in connection with the construction and maintenance of its railways. And if so, whether the discrimination is nevertheless justified as being necessary for the development of the State, and applying equally to goods within the State and to goods passing into the State from other States.

Jumbunna coal rates

Preferences may be of two kinds:

  1. lower rates to goods from another State, to secure traffic from a portion of that State;
  2. lower rates to goods produced in the State.

The latter kind of preference is allowable if necessary for the development of the territory of the State, provided that it applies equally to goods passing into the State from other States. No objection could be taken to a low rate on the Victorian railways for the carriage of Victorian coal if the low rate were necessary to develop the territory by opening up coal mines, and the same charges were made for the carriage between the same points of coal from other States.

The rates for the carriage of coal from Jumbunna to Melbourne, Bendigo, and Ballarat, respectively are nominally 4s 9d, 10s Id and 9s 3d per ton. But of this amount the Victorian Treasury pays to the Railway Department Is 7d, and the balance only is paid by the consignor or consignee. Therefore the consignor or consignee of Jumbunna coal to Melbourne pays 3s 2d per ton; to Bendigo (via Melbourne) 8s 6d per ton; and to Ballarat (via Melbourne) 7s 8d per ton. Against this the consignor or consignee of (say) Newcastle coal from Melbourne to Bendigo pays 8s 5d per ton, and from Melbourne to Ballarat 8s per ton.

What has to be looked at is the substance of the transaction. The State authority makes a rate for the carriage of coal produced in its own State, and in effect the State reduces that by itself paying part of the rate. For all practical purposes, the rate paid by the consignor or consignee is the real rate.

It follows that the rate for Jumbunna coal from Jumbunna to Ballarat is 7s 8d per ton, whilst the rate for (say) Newcastle coal from Melbourne to Ballarat (a part of the same journey, and only one half the distance) is 8s. The Newcastle coal pays actually more for carriage from Melbourne to Ballarat (74 miles) than the Jumbunna coal pays for the carriage from Jumbunna to Melbourne (73 miles) and thence from Melbourne to Ballarat.

I am clearly of opinion that these rates do not apply equally to Victorian coal and to coal from the other States, and therefore could not get the benefit of the exemption in favour of rates 'necessary for the development of the territory of the State'. Under these circumstances, I think that they might well be held to constitute a preference or discrimination which is undue and unreasonable, and unjust to the State.

The Bendigo rates are nearly, but not quite, as strong an instance. The rate from Jumbunna to Bendigo, via Melbourne (73 + 100 miles) is 8s 6d; the rate for (say) Newcastle coal from Melbourne to Bendigo is 8s 5d. Here the rate for the Newcastle coal for the part journey (100 miles) is Id less than the rate for the Jumbunna coal (173 miles). But in view of the fact that the specially reduced rate for Jumbunna coal for the part of the journey from Jumbunna to Melbourne is 3s 2d, it appears clear that the Newcastle coal is discriminated against, and that the rate does not apply equally to coal from other States.

Victorian wool rates

The facts stated as to the rates from Echuca to Melbourne appear prima facie to disclose an undue preference to New South Wales wool, but more detailed information as to the exact rates [and the] circumstances under which they are charged would be necessary before a definite opinion could be expressed. The facts stated as to the Broken Hill and Oodnadatta rates also disclose a case for inquiry, but more exact information would be necessary before advising definitely.

New South Wales rates from Queensland border

There is also forwarded with these papers a letter of 4 October 1906 from the Commissioner of Railways, Queensland, to his Minister, alleging that certain rates on the New South Wales railways are intended to divert traffic from the Queensland railways to those of New South Wales. Instances which he quotes are:

Greasy wool: £. s. d.
Bourke to Darling Harbour (509 miles) 3. 9. 2.
Nyngan to Darling Harbour (383 miles) 3. 3. 11.
Inverell to Sydney (510 miles) 3. 9. 2.
Werris Creek to Sydney (256 miles) 2. 14. 8.
Highest class merchandise:
Sydney to Bourke (509 miles) 6. 10. 0.
Sydney to Dubbo (284 miles) 6. 7. 11.
Sydney to Inverell (510 miles) 6. 15. 0.
Sydney to Gunnedah (296 miles) 6. 10. 11.

It appears that the rates to and from the competitive points are very slightly higher than the rates to and from non-competitive points little more than half the distance from Sydney. To decide whether this is or is not an undue discrimination, it would be necessary to examine the whole system of long distance rates on the New South Wales railways generally. I would suggest that the facts stated in Mr Thallon's letter be brought under the notice of the New South Wales Government with a request that they should submit their view of the position.

[Vol. 6, p. 39]