Opinion Number. 69

Subject

PREFERENCE TO ONE STATE OVER ANOTHER STATE
WHETHER CONTRACT FOR CARRIAGE OF MAILS BETWEEN WESTERN AUSTRALIA AND SOUTH AUSTRALIA INVOLVING PASSENGER AND FREIGHT SUBSIDIES AMOUNTS TO

Author
Key Legislation

CONSTITUTION, ss. 51 (i), (v), 99 : POST AND TELEGRAPH ACT 1901, s. 15

Date

It is proposed to call for tenders for a new contract for the conveyance of mails between Esperance (Western Australia) and a port in South Australia. The proposed contract embodies certain conditions which concern trade rather than strictly postal business.

The printed form of conditions enclosed with the papers contains clauses providing-

  1. that every steamship employed in the contract shall have a gross registered tonnage of at least 700 tons, and a specified accommodation for passengers;
  2. that the steamship shall where practicable ship and discharge all passengers and cargo at jetties and wharves;
  3. that at each visit to the ports mentioned in the contract the contractor shall land or ship all passengers and cargo as required;
  4. that the rates for the freight and for passengers shall be the subject of mutual agreement.

These conditions, it is stated, will apparently increase the cost of the service. It is not stated by how much-or which of them are wholly or partly advantageous to the postal service itself.

The Minister for Trade and Customs asks to be advised as to the constitutionality of the apparent subsidy for passenger and freight service between the ports.

Under section 51 of the Constitution the Parliament has power to make laws for the peace, order, and good government of the Commonwealth with respect to:
(i) Trade and commerce . . . among the States;
(v) Postal . . . services.

Under section 15 of the Post and Telegraph Act 1901, the Postmaster-General may enter into contracts on behalf of the Government of the Commonwealth for or in respect of the carriage of mails by land or sea or for any purpose incidental to the carrying out of the Act, and may stipulate for such terms and conditions as he thinks fit for securing the due, regular and efficient performance of the contract.

By section 99 of the Constitution it is provided that:
The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof.

The Government of the Commonwealth clearly has power to grant subsidies for purposes of interstate trade, but this would be a matter for the Trade and Customs Department and not for the Post Office. The Postmaster-General has no power to bind the Commonwealth by a contract for a subsidy unless it is related to, or incidental to, the postal service.

I am of opinion that if a contract made by the Postmaster-General is substantially and essentially a contract for the carriage of mails, there is nothing unlawful in the imposition of conditions designed to give facilities for passengers and trade, even though the cost of the service be thereby increased, provided that these conditions are decidedly subsidiary in character and in cost. Some of these conditions may incidentally increase the postal revenue, or the utility of the postal service and, even apart from this consideration, the Postmaster-General has a right to impose conditions for the carriage of mails which will be in the general public interest. He should not, under guise of a postal contract, enter into an agreement the main purpose of which is not postal.

Assuming therefore that the main purpose of the proposed contract is the carriage of mails, I see nothing necessarily unlawful in the incidental traffic provisions above mentioned.

There are no facts stated in the papers from which I can form an opinion whether the proposed contract is unduly increased in cost by these conditions, or whether it constitutes a preference to one State or any part thereof over another State or any part thereof. To establish such a preference it would probably be necessary to show that the subsidy, regarded as a subsidy to trade, involves a substantial interference with the natural flow of traffic, or inflicts unfair inj ury upon some competing point.

The mischief against which section 995 of the Constitution is directed is discriminating legislation by which some localities are favoured at the expense of others; and the prohibition of the section must be read in this light. It is a practical impossibility for every act of Federal legislation or administration to benefit every State and every locality equally. Thus the construction of a railway from Adelaide to Perth would enormously benefit the localities through or near which it passed, whilst localities in the northern part of Western Australia would be absolutely unaffected. The same must be true of all Commonwealth public works and undertakings; they must necessarily be, to some extent, partial in the benefits which they confer. For instance, the contract with Burns Philp and Company Limited for the island trade directly benefits Sydney, but does not in the same way benefit Perth. The mere fact that the main or exclusive direct benefit of a 'law or regulation of trade, commerce, or revenue' is confined to particular localities does not necessarily mean a 'preference' within the meaning of section 99.

The question may perhaps be raised whether the same or somewhat similar conditions are or are not imposed by the Post Office in its shipping contracts say in Queensland, or to Port Darwin.

It is understood, too, that on land lines it is often stipulated that mails should be carried by coaches. But the settlement of these latter points is a matter for departmental administration and, if the power is abused, for political rather than legal redress.

[Vol. 2, p. 9]