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[1978] HCA 36
General information, not legal advice.
High Court of Australia
1978-07-01
Aickin JJ
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High Court of Australia Barwick C.J. Gibbs, Stephen, Jacobs, Murphy and Aickin JJ. Bartter's Farms Pty Ltd v Todd [1978] HCA 36
ORDER Demurrer allowed with costs. Action dismissed with costs.
The Egg Industry Stabilisation Act, 1971 N.S.W. ("the Act") places a restriction on the keeping of hens, defined as female domesticated fowls of the genus gallus which are not less than six months old, unless they are broiler breeder hens, defined as a hen which is not one of a list of species of hens and which is used for the purpose of producing broiler chickens, being chickens not intended to be used for the production of eggs.
The general purpose of the Act is stated to be the stabilization of the egg industry. The limitation and control of the means of production of eggs is a feature of that stabilization. It may be granted that eggs are produced for sale both intrastate and interstate and that a consequence of the limitation of the number of hens kept for the production of eggs will be a limitation of the volume of eggs available for sale, intrastate as well as interstate.
The plaintiff is engaged in New South Wales in the business of keeping hens for the production of eggs and egg products. It is the holder of a licence under the Act to keep a designated number of hens. In addition to the number of hens covered by the licence, the plaintiff keeps an additional number of hens which are segregated from those covered by the licence. These additional hens are kept in particular sheds. The eggs they produce are exclusively used, either as eggs or as egg products, to perform written contracts held by the plaintiff by which eggs and egg products are sold to buyers located in another State for delivery by the plaintiff from New South Wales into that other State. These contracts are formed by written orders by interstate buyers accepted by the plaintiff. Because of its practice in the segregation of the additional hens and in the devotion of their produce exclusively to the furtherance of its interstate trade in eggs and egg products, the plaintiff believes that it has no need of any licence to keep such additional hens and that keeping them without any licence is lawful.
The plaintiff commenced a suit in this Court, alleging in a statement of claim, amended during the proceedings, the facts whose substance I have recited, and seeking a declaration that the Act is invalid, or in the alternative that s. 18 (1) (a) (i) thereof is invalid, or in the further alternative that that section is invalid in so far as it would apply to the keeping by the plaintiff in the manner I have described of the additional hens.
The basis of the plaintiff's suit is that the Act, but particularly s. 18 (1) (a) (i), infringes the freedom of interstate trade guaranteed by s. 92.
The defendants are members of the Poultry Farmer Licensing Committee set up by s. 8 of the Act. They have demurred to the plaintiff's statement of claim as amended.
A brief outline of those provisions of the Act which are material to the resolution of the demurrer should be given at the outset of these reasons.
Section 16 makes it an offence against the Act to keep hens other than broiler breeder hens without a licence to do so, or to keep such hens otherwise than in accordance with the conditions and restrictions of a licence.
Section 17 enables the Licensing Committee to issue a licence and to impose conditions and restrictions as specified in the licence.
(1) A license shall contain a description of the place to which it relates and shall specify that the conditions to which it is subject include -
(a) a condition that the licensee will not keep at that place -
(i) hens that exceed in number the hen quota specified in the license of that licensee or, where the license is issued in the name of a partnership or in the names of the members of a partnership, hens that exceed in number the total of the hen quotas specified in the license of each member of the partnership so specified; or
except in accordance with a permit issued under Part VIII; and
Division 4 of the Act provides for hen quotas but I see no need to examine the detail of this division for present purposes, or the manner in which such quotas have been determined.
Part III of the Act makes provision for constituting the Poultry Farmer Licensing Committee and for the manner of the discharge of its functions. It is this Committee which is able to grant a licence to keep hens for the production of eggs.
The plaintiff has argued that the limitation upon the number of hens it may keep for the production of eggs for sale and delivery from New South Wales into other States constitutes a direct burden upon its interstate trade in eggs and egg products. It is said that the contracts with the interstate buyers which contractually call for the delivery of eggs and egg products across State lines themselves form part of interstate trade and commerce and that the Act, and particularly s. 18 (1) (a) (i), by requiring the possession of a licence to keep hens, such licence being in the discretionary grant of the Licensing Committee, directly precludes the plaintiff from fulfilling those contracts, or, at any rate, places an obstacle in the way of such performance. The Act therefore, so it is said, directly burdens interstate trade and commerce.
But the contracts, albeit themselves forming part of interstate trade and commerce, are for the sale and delivery of eggs and egg products by description. They do not relate to any specific eggs or any specific egg products. It may be granted that any eggs or egg products appropriated by the plaintiff to these contracts would at that time become the subject of interstate trade and commerce. But before that time, eggs and egg products not so appropriated are not, in my opinion, the subject of interstate trade and commerce.
To deprive a producer of his product before it has become part of interstate trade and commerce has long been held, and in my opinion correctly held, not to be an infringement of s. 92 unless the act of deprivation is established as having been done to prevent the introduction of the product into interstate trade and commerce: see Carter v. Potato Marketing Board [26] and cf. James v. Cowan [1] ; see also Wilcox Mofflin Ltd. v. New South Wales [2] .
A law which prevents the coming into existence of a product which the producer intended to adventure into interstate trade and commerce if the product should materialize does not, in my opinion, infringe the guaranteed freedom. Such a law is, in my opinion, a fortiori of an expropriation statute. I adhere to the view I expressed in Damjanovic & Sons Pty. Ltd. v. The Commonwealth [3] . What is there said was on the footing that the Act there in question may have been motivated by a desire to reduce the interstate traffic in eggs. But its validity was none the less upheld because, in my opinion, the restraint upon the means of production of eggs did not directly burden the interstate trade and commerce in eggs. Such impact as it had upon that trade was but remotely consequential and fell into the area spoken of in The Commonwealth v. Bank of New South Wales [4] : "Section 92 is violated only when a legislative or executive act operates to restrict such trade, commerce and intercourse, directly and immediately as distinct from creating some indirect or consequential impediment which may fairly be regarded as remote."
Here the plaintiff has argued that a contract to sell and deliver into another State all eggs produced by specified hens would immediately create interstate trade, the existence of which would preclude the State and Commonwealth alike from depriving the plaintiff of the opportunity of keeping the hens producing eggs to be used in the performance of an "interstate" contract. The plaintiff assumed that, of necessity, such a result would follow from the nature of the terms of the supposed contract. I am far from being satisfied that this assumption is warranted. The supposed contract may amount to a promise by the vendor to keep the specified hens and harvest the eggs and thereafter to sell and deliver the eggs or egg products interstate. But it is at least doubtful if there could be a trade in eggs which do not exist. As commodities, the earliest time at which they could be the subject of sale would be the moment they were new laid. The antecedent obligation of the plaintiff to keep those hens and harvest the eggs would not itself, in my opinion, be an operation of interstate trade and commerce.
But, arguing from the assumption he made, the plaintiff's counsel submitted that, although no such contract existed in this case, there was no real difference between the situation which the existence of such a contract would create and the situation in the present case. Government intervention to prevent the keeping of hens from which the eggs necessary for the performance of the contracts come in either case would directly burden the plaintiff's interstate trade in eggs and egg products. I might say in passing that the production of eggs from the additional hens cannot properly be said to be necessary for the performance of the contracts with the interstate buyers.
But, in any case, the conclusion drawn by counsel does not follow from the assumed premises. The step the appellant's counsel thought essential in his assumed situation is noticeably absent in the present situation. As I have already indicated, the contracts in this case are for the sale of eggs by description: no specific eggs whether in esse or in posse are the subject of any of the contracts.
In my opinion, such impact as the restriction placed by the Act on the keeping of hens has on the plaintiff's interstate trade in eggs and egg products is but consequentially remote. In my opinion, s. 92 does not invalidate the Act or s. 18 (1) in particular.
The demurrer should be allowed and the action dismissed with costs.
In this action the plaintiff seeks a declaration that the Egg Industry Stabilisation Act, 1971 N.S.W., as amended ("the Act") is invalid, or alternatively a declaration that s. 18 (1) (a) (i) of the Act is invalid, or in the further alternative a declaration that s. 18 (1) (a) (i) is invalid to the extent that it would apply to the keeping by the plaintiff of hens for the purpose of obtaining by their efforts eggs and egg products which the plaintiff has a purpose and intention to sell in interstate trade and commerce. The plaintiff also seeks an injunction.
The Act according to its long title is "An Act to provide for the stabilisation of the egg industry; to provide for the constitution of a Poultry Farmer Licensing Committee and to define its powers, authorities, duties and functions; to provide for the taking of polls of poultry farmers prior to the formation and dissolution of the Licensing Committee; to provide for the licensing of poultry farmers; to provide for the imposition of quotas on the keeping of hens by licensed poultry farmers; and for purposes connected therewith." By s. 16 (1) and (2) it is provided as follows:
(1) A person who keeps hens without being the holder of a license is guilty of an offence against this Act unless the hens are broiler breeder hens.
(2) A licensee who keeps hens otherwise than in accordance with the conditions or restrictions to which his license is subject is guilty of an offence against this Act unless the hens are kept in accordance with a permit issued under Part VIII of this Act.
The expression "broiler breeder hen" is defined in s. 3 (1); to come within the definition a hen must be used for the purpose of producing "broiler chickens", that is, chickens intended to be used otherwise than for the purpose of producing eggs. A permit issued under Pt VIII of the Act authorizes the holder to keep hens other than broiler breeder hens or hens used for the production of eggs for human consumption: s. 48 (1). Section 18 (1) provides as follows:
(1) A license shall contain a description of the place to which it relates and shall specify that the conditions to which it is subject include -
(a) a condition that the licensee will not keep at that place -
(i) hens that exceed in number the hen quota specified in the license of that licensee or, where the license is issued in the name of a partnership or in the names of the members of a partnership, hens that exceed in number the total of the hen quotas specified in the license of each member of the partnership so specified; or
except in accordance with a permit issued under Part VIII; and
The calculation of hen quotas is governed by a number of provisions of the Act: see ss. 27-30, 47-47A; the details of these sections do not matter, although it may be mentioned that by s. 27 the Governor is given what appears to be an unfettered discretion to fix the State hen quota, and s. 30 has the effect that if the State hen quota is varied by the Governor all hen quotas are varied accordingly.
The defendants have demurred to the plaintiff's statement of claim, which has been amended by leave during the course of argument. The facts alleged in the amended statement of claim, which must for the purposes of the demurrer be taken as correct, are, so far as is material, as follows. The plaintiff carries on the business of keeping hens for the purpose of obtaining eggs and egg products. This business is carried on at Hanwood, in New South Wales. The plaintiff is licensed under the Act to keep hens, and it is a condition of that licence that the plaintiff will not keep hens that exceed in number the hen quota specified in the schedule thereto. The plaintiff in fact keeps its quota of hens but it keeps in addition, in two particular sheds (sheds 7 and 11), a further number of approximately 50,000 hens. In the course of its business the plaintiff has at all material times sold in New South Wales large quantities of eggs and egg products to persons in Victoria, pursuant to a standard form of contract under which it is provided that the plaintiff will deliver the quantity of eggs or egg products specified in the order to the buyer in Victoria from Hanwood in New South Wales. The eggs and egg products, the subjects of these contracts, are transported by the plaintiff from New South Wales to Victoria by road. At all material times the plaintiff has devoted and applied, and has an intention to devote and apply, the whole of its output of eggs and egg products from the hens kept in sheds 7 and 11 to the performance of the contracts in the form mentioned. The eggs collected from hens in those sheds are segregated from eggs laid by hens in other sheds, and in making up loads of eggs for despatch to Victoria the plaintiff uses first the eggs laid by hens in sheds 7 and 11. When it is necessary to pulp the eggs, the egg pulp resulting from eggs laid by hens in sheds 7 and 11 is similarly sent to Victoria. There has on every occasion been a shortfall between the number of eggs available and the number required under the contracts and this has been made up from eggs laid by hens in other sheds. The defendants, who are members of the Poultry Farmer Licensing Committee, seek to restrict the number of hens kept by the plaintiff to the number specified in the licence. If the plaintiffs cannot keep the additional hens which it now keeps in sheds 7 and 11 it will be unable to honour all of its contracts with the buyers in Victoria.
The transactions between the plaintiff and the buyers in Victoria are of an interstate character within the test laid down in W. & A. McArthur Ltd. v. State of Queensland [5] . Moreover, the facts pleaded establish that the plaintiff has in the past applied, and intends in the future to apply, all the eggs produced by the hens in sheds 7 and 11, and all egg products resulting from such eggs, in the performance of the interstate contracts. It is of course possible that in future orders will fall off, so that not all eggs produced from sheds 7 and 11 will be required to fulfil interstate contracts. However the facts alleged do provide the necessary basis to call for a decision on the question whether the protection of s. 92 of the Constitution extends to the keeping by the plaintiff of the hens in sheds 7 and 11 from which the eggs and egg products the subject of the interstate contracts are produced.
On behalf of the plaintiff it was submitted that the Act, although expressly dealing with the keeping of hens, in truth controls the sale of eggs. It was further submitted that the Act directly impairs the freedom of the plaintiff to sell eggs interstate, or alternatively directly restrains an activity of the plaintiff which is an inseparable concomitant of the plaintiff's interstate trade. It is true that the Act, in providing for the licensing of poultry farmers and the imposition of the quotas on the keeping of hens, reveals that its concern is with hens kept for the production of eggs. This is shown by the title of the Act, by the provision that no licence is necessary to keep broiler breeder hens (s. 16 (1)) and by the provision for the grant of permits to keep hens other than broiler breeder hens or hens used for the production of eggs for human consumption (s. 48 (1)). It may be assumed that the purpose underlying the Act is to control the production of eggs for sale, but the fact remains that the Act does not place any restriction, direct or indirect, on the sale of eggs; what it restricts is the keeping of hens. The question therefore is whether statutory provisions which prevent the plaintiff from keeping hens for the purpose of producing eggs intended to be committed to interstate trade infringe the freedom granted by s. 92 of the Constitution.
Consistently with authority this question must be answered in the negative. In Grannall v. Marrickville Margarine Pty. Ltd. [6] and in Beal v. Marrickville Margarine Pty. Ltd. [7] , it was held that a law which restricts the right or liberty of a person to manufacture goods which are intended to be used in interstate trade does not interfere with the freedom protected by s. 92. This is so even though the purpose, motive or object of the law may be seen to have been that the goods when manufactured should not be sold in interstate trade (see Grannall's Case [8] ), and even though the manufacture of the goods was ordered by a buyer in another State on terms that the manufactured goods should be delivered in that other State (see Beal's Case [9] ). In Damjanovic & Sons Pty. Ltd. v. The Commonwealth [10] a statute which imposed a levy in respect of hens kept for commercial purposes was held to apply validly in respect of hens owned and kept for the production of eggs for sale solely in the course of interstate trade. These three decisions must be overruled if it is to be held that the statutory provisions in the present case infringe upon the freedom granted by s. 92.
The decisions in Grannall's Case [11] and in Beal's Case [12] depend upon the acceptance of two propositions which may be shortly restated as follows: (1) that the protection of s. 92 does not extend to acts which form no part of interstate trade, but are merely antecedent to such trade, even if they are incidental, ancillary or conducive to it: see Grannall's Case [13] , and Beal's Case [13a] ; and (2) that the manufacture of goods intended for use in interstate trade is not part of interstate trade but merely preliminary to it: see Grannall's Case [14] ; Beal's Case [15] . Both of these propositions are in my opinion correct. The first is a refinement of the principle, established by The Commonwealth v. Bank of New South Wales [16] , "that s. 92 is violated only when a legislative or executive act operates to restrict such trade, commerce and intercourse directly and immediately as distinct from creating some indirect or consequential impediment which may fairly be regarded as remote". I have already cited some of the authorities in which this proposition has been accepted (see S.O.S. (Mowbray) Pty. Ltd. v. Mead [17] ; Perre v. Pollitt [18] ) and need not repeat the citations there given. The formulation reached in these authorities should in my opinion be accepted. It is trite to say that the deceptively simple words of s. 92 conceal many difficulties, and it seems to me to follow that for this reason it is important for the Court, in an attempt to attain some degree of certainty, to adhere to doctrines that have been painstakingly evolved in a succession of careful judgments. The scope and meaning of the section are more likely to be revealed from the exposition which is to be found in those judgments than from the terse words of the section itself. The second proposition, that manufacture, although an essential preliminary to interstate trade in the manufactured product, is not itself part of that trade, seems to me to be self-evident.
In Damjanovic & Sons Pty. Ltd. v. The Commonwealth [19] the Court was unanimous in the result but there was a difference of opinion as to the reasoning by which the conclusion reached should be supported. Three members of the Court held that the case was governed by Grannall v. Marrickville Margarine Pty. Ltd. [20] and followed and applied that decision [21] . The other three members of the Court, while not questioning the authority of Grannall's Case [22] , declined to hold that the keeping of hens for the purpose of producing eggs was analogous to manfuacture, but upheld the levy for other reasons [23] . On either view the decision is an authority which supports the validity and application of the statute in the present case. Nevertheless I should express my own opinion as to the ground on which the decision should be supported. In my respectful opinion there is no distinction, for purposes relevant to s. 92, between the production of eggs by hens and the production of margarine by manufacture. In both cases the question is whether the keeping of the hens or the engaging in the process of manufacture forms part of the interstate trade in the eggs or manufactured product, and in both cases the answer is that it does not form part of that trade but is anterior to it.
On behalf of the plaintiff it was submitted that Grannall's Case [24] , Beal's Case [25] and Damjanovic's Case [26] need to be reconsidered in the light of the later decision in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of N.S.W. [27] . That case dealt with the quite different question whether laws which restricted the sale of milk in New South Wales would infringe s. 92 if applied to the first sale in New South Wales of milk brought from Victoria for sale in New South Wales. The affirmative answer which the Court gave to that question does not cast any doubt on the conclusion reached in the three earlier cases. However, reliance was placed on statements in some of the judgments in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of N.S.W. [27] which it was submitted indicate that s. 92 is concerned with the practical operation of the legislation whose validity is impugned. Barwick C.J., in discussing the statement of the Privy Council in Bank of New South Wales v. The Commonwealth [28] which I have already cited, said [29] :
The language of Their Lordships' decision lends no support whatever, in my opinion, to the proposition that the economic result produced by an Act is not within its direct operation. When one remembers that the purpose of examining the operation of an Act in relation to s. 92 is to determine whether the situation produced by that Act leaves trade and commerce free, it immediately seems impossible to exclude the economic product of the Act as irrelevant - as outside the direct operation of the Act. Mason J. said [30] that their Lordships, in the passage cited, did not intend to exclude from consideration the practical effect of the law. He added [31] : To say that consistently with s. 92 it is permissible to enact laws whose practical effect is to burden interstate trade is to reduce the constitutional prohibition to a legal formulation which may be readily circumvented. He went on to apply this statement to the legislation there in question and said [32] : In the conventional language of the cases it imposes a burden on the importer of Victorian pasteurized milk by preventing him from selling his product in the State. This results in my opinion from the direct and immediate operation of the law. It is not a mere economic or social consequence of the regulation. Jacobs J. [33] , after saying that the operation of the legislation must be examined in order to determine its impact, if any, on trade, commerce and intercourse, and to determine whether that impact is impermissible within s. 92, went on to say: This inquiry is not a literal but a practical inquiry in both its principal aspects, namely, whether the operation of the legislation creates an impediment on trade, commerce and intercourse between the States which is a direct one (that is to say, not a consequential impediment which may fairly be regarded as remote), and whether the legislation can properly be regarded as regulatory. One must look for the burden or restriction not only in the language of the legislation but in the operation of the legislation. It is unnecessary in the present case to consider the implications of these statements, all of which, however, repeat that it is the direct operation of the impugned legislation that has to be considered. There is nothing in the judgments in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of N.S.W. [34] which is inconsistent with the principle that I have already stated, that the protection of s. 92 does not extend to acts which form no part of interstate trade but are merely antecedent to it, or which affects the authority of Grannall's Case [35] , Beal's Case [36] or Damjanovic's Case [37] . Those three decisions ought to be followed. In the present case the direct operation of the law, whether it be described as its legal or its practical operation, is to restrict the keeping of hens. As a matter of practical reality the keeping of hens is something different from the trade in the eggs which the hens produce; it is antecedent to that trade. No doubt to forbid the keeping of hens has an effect on the sale of eggs but it is an effect which on any view is indirect or consequential and ought properly to be regarded as remote. 1. (1955) 93 C.L.R. 55. 2. (1966) 114 C.L.R. 283. 3. (1968) 117 C.L.R. 390. 4. (1975) 134 C.L.R. 559. 5. (1975) 134 C.L.R. 559. 6. (1949) 79 C.L.R. 497; [1950] A.C. 235. 7. (1975) 134 C.L.R., at p. 589. 8. (1975) 134 C.L.R., at p. 606. 9. (1975) 134 C.L.R., at pp. 606-607. 10. (1975) 134 C.L.R., at p. 607. 11. (1975) 134 C.L.R., at p. 622. 12. (1975) 134 C.L.R. 559. 13. (1955) 93 C.L.R. 55. 14. (1966) 114 C.L.R. 283. 15. (1968) 117 C.L.R. 390.
For these reasons, in my opinion, the provisions of the Act, in their application to the plaintiff, do not infringe s. 92. I would allow the demurrer.
The defendants, being the members of the Poultry Farmer Licensing Committee constituted under s. 8 of the Egg Industry Stabilisation Act, 1971 N.S.W., as amended, have demurred to the plaintiffs' statement of claim upon the ground that it discloses no cause of action to which effect can be given against them.
The plaintiff companies, together trading as Bartter's Enterprises, carry on business as poultry farmers at Hanwood, New South Wales. They are licensed under the Act to keep a flock of some two hundred thousand hens. They also keep, in addition to and segregated from those hens which they are licensed to keep, a further 50,000 hens, "over-quota" hens. Unless s. 18 (1) (a) (i) of the Act is either invalid or inapplicable to those over-quota hens, the keeping of them is unlawful. The plaintiffs have sought declarations that the Act as a whole or that provision of it is invalid or that that provision of it is invalid to the extent that it would apply to their keeping of hens for the purpose of obtaining from them eggs and egg products (which I shall together refer to as eggs) which the plaintiffs intend to sell in interstate trade and commerce.
Following amendments made to the plaintiffs' statement of claim in the course of argument, the facts upon the basis of which this demurrer has been argued are as follows. The plaintiffs keep their 50,000 over-quota hens exclusively for the purpose of obtaining by their efforts eggs which they use to satisfy the needs of their interstate trade in eggs. The plaintiffs sell in New South Wales large quantities of their eggs to various Victorian purchasers pursuant to a standard form of contract which consists of a standing order from the purchaser calling for regular future deliveries, "until further notice", of specified quantities of eggs, to be delivered to the purchaser in Victoria from Hanwood, New South Wales. A sale note records each delivery of eggs in accordance with a standing order. The property in the eggs passes at the time they are placed in cartons or containers at Hanwood to fulfil a buyer's order, from which time the eggs are at the buyer's risk. The plaintiffs transport the eggs by road from New South Wales to Victorian purchasers several times each week. The whole output of eggs from the plaintiffs' over-quota hens is devoted to supplying such interstate contracts. Since eggs are not delivered interstate each day, those laid by over-quota hens on days when there are no such deliveries are collected and placed in cold storage, segregatred from other eggs, pending the next interstate delivery. The plaintiffs, in making uploads of eggs for despatch to Victorian purchasers, first have recourse to eggs laid by over-quota hens, but these are never enough to meet those interstate orders and the shortfall is made up from eggs laid by the plaintiffs' licensed flock of hens. Eggs laid by over-quota hens which do not meet the specifications of an order are pulped and the pulp despatched to the Victorian purchaser.
This is the way in which, at all relevant times, the plaintiffs have dealt with the eggs of their over-quota hens. It is also the way in which they intend if permitted, to continue to carry on business in these eggs in the future. It is not economically feasible for them to satisfy interstate orders for eggs by buying eggs from third parties: unless they can keep their over-quota hens they will be unable to satisfy those orders.
It is, then, by virtue of their interstate trade in eggs that the plaintiffs seek to invoke, against the effect of s. 18 (1) (a) (i) of the Act, the protection of s. 92 of the Constitution. However it is not upon the plaintiffs' interstate trade in eggs that, in terms, s. 18 (1) (a) (i) operates but rather upon the keeping of hens which lay some of those eggs, namely the over-quota hens. To say this is to identify the critical issue upon which this case turns: whether a legislative prohibition upon the keeping of more than a licensed number of hens, which prohibition affects the number of eggs available to a poultry farmer with which to satisfy, from his own hens, interstate orders for eggs, impairs that absolute freedom of trade upon which s. 92 of the Constitution insists.
The Act, by s. 16, makes it an offence to keep hens, other than broiler breeder hens, without a licence. Broiler breeder hens are, no doubt, excluded so as to ensure that hens which are kept for the rearing of chickens for the table, as distinct from hens kept for the production of eggs, are unaffected. Section 18 (1) (a) then requires that any licence which may be issued shall contain a term that the licensee will not keep hens in excess of his licensed quota otherwise than in accordance with a permit. By s. 58 permits may not be issued for the keeping of hens used for human consumption. The control of poultry numbers is by means of hen quotas.
It is unnecessary to describe either the provisions by which individual hen quotas are determined and may be varied or those under which licences are granted and may be revoked. It is enough to note that, as was conceded by counsel for the plaintiffs, the legislation does, in form, select the keeping of hens as the criterion for its application, although the name of the Act, its long title and the substance of its provisions disclose, clearly enough, that the legislative purpose to which the Act gives effect is the stabilization of the egg industry. The legislation does this not by any intervention in the marketing of eggs but by the exercise of control over the means of production, the egglaying hens.
A constitutional limitation upon legislative power which is expressed in terms of the freedom of a particular human activity, in this case trade, commerce and intercourse among the States, necessarily gives rise to questions both as to the precise limits of that protected activity and as to the effect which the limitation may have upon legislative measures which do not deal with the activity itself but which, in dealing with other activities, produce an effect upon it.
In the present case questions of the first sort do not, I think, arise: the legislation says nothing as to interstate trade. The presently relevant example of such trade, interstate trade in eggs, is in no way directly dealt with by the Act, which in that sense leaves its freedom unimpaired. However questions of the second kind clearly arise. The legislation strikes at the means of production of the commodity which the plaintiffs produce and sell: because they must produce less, so must they sell less. The effect of the legislation upon the plaintiffs, as producers, is, then, different in kind from its effect upon mere dealers in the commodity. For the latter any restriction imposed upon production will mean only that supplies become more difficult to obtain or more expensive, perhaps both. For producers the effect is more absolute unless they are to extend their existing business of producers to include that of dealers, buying in from others and reselling.
The question of the validity of legislation explicitly aimed at the control of production of a commodity and which does not deal directly with trade, whether interstate or domestic, in that commodity once the commodity comes into existence, is no novel one. In the past such legislation has not been held to affect the constitutional freedom of interstate trade. The same view must, I think, be taken in the present case. There is, no doubt, no philosophically "true" answer to a question such as this, just as there is no inherently correct meaning of "absolutely free". It is precisely because of this that, once a clear line of authority has emerged which provides an answer to such a question, that answer should not lightly be departed from. Whatever modest achievements may have been made in arriving at a received meaning and operation for s. 92 have been the result of those accretions of judicial precedent made necessary by the generality, if not the obscurity, of the text itself.
In the present case past decisions of this Court furnish, in my view, a quite certain answer: a clear principle has evolved and, while paying due regard to what has been said by Dixon J. concerning the formulation of general propositions - Gratwick v. Johnson [38] - that principle may nevertheless properly be applied in the present case.
The principle is that legislative intervention confined to the activity of production will not generally offend against s. 92, despite the fact that it may, and frequently must, have an effect upon trade in that which is produced: despite also the fact that it may clearly be perceived that the legislative intention is that it should have that effect. A clear distinction is to be drawn between the activity of production, whether by agricultural husbandry or by industrial manufacture, primary or secondary industry, and that which is produced, the resultant commodity.
Whether legislative interventions in relation to the commodity produced, by, for example, its compulsory acquisition or the placing of restrictions upon dealings in it or movement of it, fall foul of s. 92 will depend upon the application of doctrines evolved by this Court. But legislative interventions which are confined to production, antecedent to the existence of the commodity in question, escape the operation of s. 92. They do so because it has been established that the activity of production is not itself "trade commerce or intercourse among the States", and it is to the latter activity that s. 92 is confined.
To make all this good I begin with a reference to Grannall v. Marrickville Margarine Pty. Ltd. [39] . It was not the first occasion upon which the Court confronted this question but it does provide particularly apt statements of the principle. The right or liberty which in that case was restricted was the bringing into existence of a commodity, margarine, by a process of manufacture and the Court said of this right or liberty that it "forms no part of the freedom of the individual to engage in activities conducted across State boundaries, that is to say the freedom which s. 92 gives ". Their Honours recognized that "without goods there can be no interstate or any other trade in goods" and that "in that sense manufacture or production within, or importation into, the Commonwealth is an essential preliminary condition to trade and commerce between the States in merchandise" [40] . However "that does not make manufacture production and importation trade and commerce among the States"; there was no reason to extend the freedom accorded by s. 92 to "something which precedes" trade and commerce "and is outside the freedom conferred" [41] : it was "quite fallacious" to think that "all matters that are incidental or ancillary to such trade, commerce and intercourse are in the same way protected from interference or control" [42] . It is not enough that the law affects "something which, because it is a sine qua non to the existence of some subject of the freedom which s. 92 guarantees, has a consequential effect on what might otherwise have been done in interstate trade" [43] . The complaint of the manufacturer of margarine was in essence "a complaint against a restriction upon the production of table margarine, not against a restriction on interstate trade. What begins as a restriction upon the production of the commodity remains a restriction on production, the validity of which rests upon an independent foundation. No latent characteristics are brought forth, no secondary meaning and application are affixed to it, amounting to an impairment of the freedom of interstate commerce" [42] . The object of the legislation was not in doubt: it was "to limit the production of margarine" [45] . The motive was equally clear: it was "so that the sale of butter on the home market should be prejudiced as little as may be by the competition of margarine" [45] . It nevertheless remained true that the legislative restriction was "not upon the freedom of trading in the commodity among the States but upon bringing it into existence".
What was said so clearly in Grannall [46] had its precursors in earlier decisions of this Court. In Matthews v. Chicory Marketing Board (Vict.) [47] Latham C.J., with whom McTiernan J. agreed, said, of a levy upon acreage planted to chicory, that it no doubt had the effect of increasing the cost of production of chicory but:
There is no inter-State element in growing an article in primary industry or manufacturing an article in secondary industry, and legislation which deals only with producing or manufacturing is not in itself legislation of a character which restricts or limits the freedom of inter-State trade. This echoed what the Chief Justice had earlier said in Hartley v. Walsh [48] where he equated the packing of fruit to "any other manufacturing or producing operation" and was therefore able to describe it as including "no interstate element". The subsequent criticism of that equation, in that otherwise much criticized judgment, by Gibbs J. in Perre v. Pollitt [49] (cf. per Jacobs J. [50] ) does not extend to but, rather, confirms the proposition implicit in the second part of the equation. In Matthews' Case Rich J. had expressed a like view [51] and compare Starke J. [52] . 1. (1955) 93 C.L.R. 55. 2. (1938) 60 C.L.R. 263, at p. 271. 3. (1937) 57 C.L.R. 372, at p. 379. 4. (1976) 135 C.L.R. 139, at p. 150. 5. (1976) 135 C.L.R., at p. 155. 6. (1938) 60 C.L.R., at p. 280. 7. (1938) 60 C.L.R., at p. 283.
More general statements, not directly concerned with the question of production and its relationship to s. 92 yet pointing in a similar direction, abound; it is enough to refer to two cases. In Wilcox Mofflin Ltd. v. New South Wales [53] in the joint judgment of Dixon C.J. and McTiernan and Fullagar JJ. it was said that "s. 92 has provided for the freedom of interstate trade, commerce and intercourse and has not extended the immunity to antecedent conditions". In Hospital Provident Fund Pty. Ltd. v. Victoria [54] there appears, in the judgment of Dixon C.J. a celebrated passage in which he said:
But if the fact or event or thing with reference to which or in consequence of which the law imposes its restriction or burden or liability is in itself no part of interstate trade and commerce and supplies no element or attribute essential to the conception, then the fact that some secondary effect or consequence upon trade or commerce is produced is not enough for the purposes of s. 92 and see per Fullagar J. [55] . 1. (1952) 85 C.L.R. 488, at p. 519. 2. (1953) 87 C.L.R. 1, at pp. 17-18. 3. (1953) 87 C.L.R., at p. 36.
Some years after Grannall's Case [56] the question of importation of goods into Australia arose in the context of s. 92. In Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [57] it was held that a restriction upon importation of aircraft to be used in interstate trade did not offend against s. 92. Grannall's Case [56] was largely cited in the judgments and Kitto J. spoke of the restriction as being upon "the doing of something (importation) which is itself altogether apart from interstate trade" - and see per Taylor and Owen JJ. [59] . Then, in 1966, Beal v. Marrickville Margarine Pty. Ltd. [60] was decided. In it McTiernan J. said [61] that even before Grannall's Case [62] which his Honour regarded as decisive of the issue before the Court, it was "established doctrine" that "manufacture in itself is not within the scope of s. 92 of the Constitution ", citing for that proposition the relevant passage from the judgment of Latham C.J. in Matthews' Case [63] . Kitto J. also relied upon Grannall's Case. His Honour regarded the manufacture of margarine as no more than "the method by which the manufacturer equips himself with the wherewithal to trade" [64] . The broad ground upon which his Honour chose to decide the case was that "where the subject-matter of a proposed interstate movement in trade is manufactured goods the manufacture of the goods is, in the nature of things, no part of interstate trade. Even where the manufacture of the goods has been ordered by a customer in another State, by communications which have crossed the State border and upon terms which stipulate for both manufacture in the supplier's State and delivery of the manufactured goods to the buyer in the buyer's State, the manufacture is still, it seems to me, of necessity a mere intra-State preparation for a proposed act of interstate trade in manufactured goods, and is not itself a part of any interstate trade" [65] .
To conclude otherwise would he thought, require a re-writing of s. 92. His Honour concluded by saying, [66] that "trade begins after manufacture is complete". Menzies J. said [66] that the actual manufacture of margarine for use in interstate trade was not itself part of that trade and Windeyer J. said [67] that the defendant's contention failed because "it confounds making goods, with which (generally speaking at all events) s. 92 has no concern, with trading in goods, with which it is concerned. Making things which when made will be sent to another State is not in a relevant sense itself engaging in interstate trade".
Owen J., after referring to Grannall's Case [68] and to the Ipec-Air Case, said of the defendant [69] :
It is, of course, true that unless it is able to manufacture margarine, it cannot fulfil its orders. That it should be free to manufacture the product which it ultimately delivers to the interstate buyer is a necessary preliminary to its ability to trade interstate but that is not to say that in manufacturing its products - and it is for this part of its activities that it claims immunity from the State law - it is engaged in interstate trade, commerce or intercourse. It is an interstate trader in margarine, not an interstate trader in the ingredients which go to make up the finished product or an interstate trader in the manufacturing processes by which it is produced. 1. (1955) 93 C.L.R. 55. 2. (1966) 114 C.L.R., at p. 313.
In Damjanovic & Sons Pty. Ltd. v. The Commonwealth [70] , as in the present case, it was a poultry farming and egg producing company which sought to rely upon s. 92 as justifying it in disregarding laws which purported to apply to it because of the keeping by it of hens for commercial purposes. Three members of the Court, Kitto, Taylor and Menzies JJ., regarded Grannall's Case [71] as decisive. Taylor J., with whose judgment Kitto J. agreed, discussed the plaintiff's reliance upon the fact that because the levy was payable upon hens kept by it "for commercial purposes" this meant that it was imposed by virtue of its trade. His Honour saw in this no ground for distinguishing Grannall's Case [71] there, too, it was for commercial purposes that margarine was manufactured and because the levy is imposed "in respect of hens kept for commercial purposes" and not upon, or with respect to, "the owner's trade in eggs" Grannall's Case [71] applied and s. 92 provided no answer to the legislation imposing the levy [71a] . Menzies J. also disposed of the case upon the authority of Grannall's Case [71] . He observed [72] that "Indeed, the commercial purpose for which the plaintiff keeps hens is one step further removed from trade than was the commercial purpose that was apparent in the earlier cases. The hens here correspond, as it were, not with the margarine in the earlier cases, but with the plant by which margarine was produced for commercial purposes."
Precisely the same observation may be made in the present case.
Barwick C.J. found little by way of analogy in the facts of Grannall's Case [71] but described it [73] , as deciding "that a statute which on its proper construction - and perhaps after the rejection of severable invalid parts of it - does no more than place a restriction upon manufacture, does not by its operation directly, in the relevant constitutional sense, burden interstate trade".
The Chief Justice went on to say [1] that in Grannall's Case [2] the Court reached that conclusion "by a fundamental decision that manufacture is not itself trade or commerce within the meaning of s. 92 of the Constitution, and that the particular limitation upon manufacture did not operate to burden in a relevant sense interstate trade in the product of such manufacture".
His Honour said that, for his part, he accepted his fundamental decision, although he took a different view of certain of the reasoning leading to it. McTiernan J. agreed with the Chief Justice. Windeyer J. said [3] that he was unable "to see how having to pay a tax calculated by reference to hens, a tax which would be payable in whatever State the hens were kept, can be said to impair the hen-keeper's freedom to send eggs in the course of trade and commerce from New South Wales to Victoria".
The very recent case of Forster v. H. Brazil & Co. Pty. Ltd. [4] related, as does the present case, to the unlawful keeping of overquota hens, in that case contrary to Queensland legislation. The appellants said that a number of their hens were committed to interstate trade, since they were to be sold interstate, and that if that number of hens was deducted from the total kept the resultant remainder would be within the quota. The appellants failed at the outset because no particular hens were shown to be so committed. Apart from factual similarity, the case is not otherwise of relevance.
The foregoing brief survey of the cases shows, I think, that this Court has, whenever the question has presented itself, regarded the activity of manufacturing or producing a commodity to be one which is distinct from that of subsequently trading in that commodity and to be, accordingly, unaffected by s. 92. No appeal to the acknowledged ability of the Court to preserve interstate trade against assault by "circuitous means or concealed design" can avail the present plaintiffs. A similar appeal was made, and rejected, in a number of the precedent cases although the Court has always kept open the possibility that some invalid impairment of interstate trade may manifest itself in legislation which at first sight appears to strike only at the activity of manufacture or production. What precisely will give rise to such a case must depend upon the particular facts; but at least the precedent cases demonstrate that those facts of the present case which are the most favourable to the plaintiffs' contention, namely the coincidence both of a legislative purpose to affect trade in a commodity by restricting its production and also of the plaintiff producers' intention to engage the commodity, once produced, in interstate trade, will not suffice. As was said in Grannall's Case [5] "what begins as a restriction upon the production of the commodity remains a restriction on production" and neither close analysis nor other processes of reasoning can convert it into an impairment of the freedom of interstate trade.
The plaintiffs sought to distinguish past decisions upon the ground that they dealt with manufacture in secondary industry whereas this was a case of production in primary industry. For such a distinction I not only find no support in the cases; the reason of the thing affords it no encouragement. If it be trade and commerce that is the subject matter of the freedom which s. 92 confers, it can be no more legitimate to extend it to the earlier activity of primary production than it is to extend it to some earlier activity of manufacture. The one is as distinct from trade and commerce as is the other: each is concerned with the coming into existence of a commodity, in which there can necessarily be no trade and commerce until it is brought into existence. No doubt it may be thought that the activity of manufacture involves a more continuous application of human volition and of human energies than is called for by the productive processes of nature, although not all farmers would share that view; but neither this possible distinction nor one founded upon the relative inevitability of the processes of growth upon which agriculture relies provides any rational ground for relevantly distinguishing one mode of production from the other.
It is for these reasons that I regard the validity of this legislation as unaffected by s. 92 of the Constitution. Section 18 (1) (a) (i) may operate in relation to the plaintiffs' over-quota hens without falling foul of s. 92. The demurrer should be allowed and the action dismissed with costs.
The facts and the relevant legislation are set out in the reasons for judgment of the Chief Justice. In my opinion the facts are not relevantly distinguishable from those in Beal v. Marrickville Margarine Pty. Ltd. [6] in which the Court applied Grannall v. Marrickville Margarine Pty. Ltd. [7] and declined to allow the correctness of the decision in the latter case to be argued. In Damjanovic & Sons Pty. Ltd. v. The Commonwealth [8] the correctness of Grannall was not argued and the decision was applied. In the present case no distinct application was made to re-argue the correctness of the decisions in Grannall and Beal even though some of the arguments presented could hardly stand with them.
I do not think that the correctness of the decisions in Grannall and Beal ought to be reviewed. I do not thereby mean that the Court must accept as binding all that was said in those cases. I do not think it legally impossible that a prohibition of manufacture or production may so directly affect trade commerce and intercourse among the States that it would be invalid under s. 92. It may be that in such a case there would emerge an element of discrimination disclosed by a conclusion that the legislation was aimed at trade commerce and intercourse among the States. The importance of the element of discrimination (or lack of discrimination) in a consideration of the validity of legislation should not in my opinion be underestimated even if the absence of discrimination does not necessarily spell validity. Thus the absence of discrimination may well be important in considering whether any effect on trade commerce and intercourse among the States is regulatory only. As I attempted to explain in my reasons in the North Eastern Dairy Case [9] the question whether a burden is direct or merely consequential cannot be kept wholly separate from the question whether a burden is regulatory only. The question whether the injunction in s. 92 has been infringed must largely be determined as one of fact and degree and in the process of decision it seems to me inevitable that the Court should bear in mind the purpose of the section, namely, that under the Constitution there was to be an economic union as well as a political union. The words "common market", with which we are now so familiar, come instantly to mind. Attempts by one unit of a federation by legislative prohibition to give itself and its residents economic advantages over other units of a federation by way of prohibition of or burdens on trade and commerce with those other units can take a great variety of forms, as other economic federations have found, and are finding, out. A burden on sales to another State may have the purpose and effect of obtaining such an advantage just as much as a burden on sales from that other State. There is much in Ch. IV to indicate that the framers of the Constitution had these possibilities very much in mind, and s. 92 is an important part of the framework designed to prevent the attainment by one unit of such impermissible advantages. When the impugned legislation reveals no such purpose or effect, it seems to me that a challenge to the validity of legislation should have considerably less chance of success.
In the North Eastern Dairy Case [10] , I said: " it is inevitable and proper that decisions should result in a pattern emerging, a pattern which will remain applicable in a given time and condition of our society". I presume to quote my own words because the approach which I there stated is sufficient for my conclusion in the present case. A pattern of decision has emerged which established that a prohibition of manufacture does not directly burden interstate trade and commerce in the goods which would, in the absence of the prohibition, have been manufactured. I am unable to distinguish manufacture from primary production in such a way that a burden on manufacture does not directly burden interstate trade but a burden on primary production does. No acceptable distinction has been suggested. Apart from this suggested point of distinction, the facts in the present case and in Beal [11] are very similar. Here a shed was set aside for hens nominated as those which would produce the eggs for fulfilment of accepted orders from buyers in another State, orders which required delivery of the eggs by the plaintiff into that other State. A purpose and effect of the impugned legislation was to limit the number of eggs produced in New South Wales for sale. In Beal [11] a purpose and effect of the legislation was to limit the quantity of margarine manufactured in New South Wales for sale. Further, the orders from buyers in the other States required manufacture of the margarine in New South Wales and the steps necessary to fulfil these orders were carried out separately from the steps in manufacture of margarine for other purposes. There is thus no significant factual difference between the two cases. I say nothing of a case where a primary producer sold in advance of production all the product of particularized livestock or growing stock over a specified period to a buyer in another State for delivery into that State. That case would need to be considered when it arose. It is not the present case. The earlier line of decision ought to be followed and for that reason the demurrer ought to be allowed.
The Egg Industry Stabilisation Act, 1971 N.S.W., as amended, imposes hen quotas and provides that a person who keeps hens without being the holder of a licence, or keeps hens otherwise than in accordance with the conditions or restrictions to which his licence is subject, is guilty of an offence. The plaintiffs claim that these provisions contravene s. 92 of the Constitution or are inapplicable to them by reason of the Interpretation Act, 1897 N.S.W., as amended, s. 14A of which keeps state legislation within constitutional limits.
The challenged provisions do not impose any customs duty or similar fiscal impost. For the reasons I gave in Buck v. Bavone [12] , s. 92 of the Constitution is inapplicable.
The plaintiffs claim that the legislation, although expressly directed to the keeping of hens, is in substance directed to preventing interstate trade in eggs. The respondents contended that the legislation had no direct or immediate effect on interstate trade in eggs and, therefore, s. 92 was inapplicable. The respondents conceded that, on their view, a discriminatory tax on the keeping of hens for interstate trade in eggs would not contravene s. 92. I disagree. In my opinion, s. 92 applies to discriminatory fiscal imposts (direct or indirect) on trade and commerce among the States. If a fiscal impost were aimed directly or indirectly at trade or commerce among the States, then, even if it were imposed on manufacture or primary production antecedent to that trade or commerce, it would still contravene s. 92, just as the imposition of a discriminatory tax on intrastate sales of interstate wine contravened s. 92 (see Fox v. Robbins [13] ).
Section 92 confers absolute freedom from discriminatory fiscal imposts. Its operation should not be confined further or alternatively by a narrow reading of the words, "trade, commerce and intercourse", or by ignoring measures which tend to prevent or indirectly penalize trade, commerce and intercourse among the States, or by allowing regulatory measures.
The demurrer should be allowed and the action dismissed.
The facts out of which this matter arises and the applicable legislation are set out in other judgments and I do not repeat them.
In my opinion this case is not distinguishable from the decision of this Court in Beal v. Marrickville Margarine Pty. Ltd. [14] which followed and applied Grannall v. Marrickville Margarine Pty. Ltd. [15] . In Beal's Case margarine was manufactured in an identifiable batch to meet an order from a South Australian customer for manufacture and delivery to the customer in South Australia. It was held by this Court that such manufacture was not protected by s. 92 of the Constitution against a prohibition of such activity under State law, because such manufacture was not part of interstate trade commerce or intercourse. That case would be distinguishable only if manufacture may be properly distinguished for this purpose from primary production, whether of animal or vegetable products, a distinction for which no rational basis was advanced. The observations made in the judgments in Matthews v. Chicory Marketing Board (Vict.) [16] cited in the reasons for judgment of Stephen J. show that no such distinction was then thought to exist. Subsequent cases have consistently maintained the proposition that production of goods is antecedent to trade and not, as such, within the protection of s. 92.
It was argued that the decision in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of N.S.W. [17] required a reconsideration of Beal v. Marrickville Margarine Pty. Ltd. [18] , Grannall v. Marrickville Margarine Pty. Ltd. [19] and Damjanovic & Sons Pty. Ltd. v. The Commonwealth [20] . I am unable to see anything in the North Eastern Dairy Case which conflicts with these decisions, nor which suggests any relevant distinction between manufacture and primary production.
Bartter's Farms Pty Ltd
Todd