Commonwealth and the Central Wool Committee v Colonial Combing, Spinning and... [1922] HCA 62 | Case summary

Commonwealth and the Central Wool Committee v Colonial Combing, Spinning and... [1922] HCA 62 | Case summary | Zoe

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Precautions acting with the advice of the Federal Executive Council has made certain regulations known as the War Precautions (Sheepskins) Regulations and the War Precautions (Wool) Regulations regulating inter alia the conditions under which sheepskins and wool may be sold and purchased in Australia And whereas the Company being engaged inter alia in the manufacture and sale of wool tops and being controlled under the said War Precautions Act 1914-1916 and the said recited regulations to the extent set forth in this agreement has entered into and desires to extend and vary contracts and to enter into further contracts for the sale of wool tops to markets hitherto supplied by it And whereas it is necessary under the said regulations for the Company to obtain the consent of the Common- wealth Government to the purchase of such sheepskins and wool as it may require for the manufacture of wool tops And whereas the Commonwealth Government has approved that resultant wool (from fellmongered sheepskins) submitted by the Company for appraise- ment shall rank and share in all advantages given by participation in a certain pool called the ' wool pool' formed in connection with the purchase by the Imperial Government of the Australian wool clip And whereas the Central Wool Committee constituted by the said regulations has recommended the Government of the Common- wealth of Australia to execute these presents . . . And whereas for the considerations hereinafter set forth the Commonwealth Government has agreed to consent to the purchase of sheepskins and wool by the Company for the purpose of manufacturing wool tops and for the purpose of holding normal reserves of stocks of sheepskins and wool (having regard to the fact that additional combing machinery is about to be installed) and has also agreed to consent to the sale by the Company of wool tops under the conditions hereinafter set forth and in consideration thereof the Company has agreed to make the payments and conform to the conditions herein- after set forth Now this agreement witnesseth as follows : - (1) The Commonwealth Government hereby consents to the sale to

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and the purchase by the Company of such wool as may be requi by the Company for the following purposes and for no other pur- - poses: (a) the purpose of manufacturing wool tops to fulfil any contracts for the sale of wool tops which have been made or extende by the Company prior to the date of these presents or which ma with the previous consent in writing of the Commonwealth Govern- ment be made or extended after the date of these presents. (b) the purpose of holding the Company's normal reserve of stocks ha due regard for any increase in wool combing plant and machinery. Any wool so purchased by the Company and found to be not suitabl , for the manufacture of wool tops shall be appraised and rank share in all advantages given by participation in the said recited woo pool but the quantity thereof shall not exceed twenty per centum of the total wool purchased. (2) The Commonwealth Governm hereby consents to the sale to and the purchase by the Company of such sheepskins green or dry as may be required by the Company and to the use by the Company of so much of the resultant product after the sheepskins have been fellmongered as may be suitable for the manufacture of tops. Any resultant wool product or products - from such sheepskins not suitable for the manufacturer of the wool tops shall be appraised and rank and share in all advantages given" by participation in the said recited wool pool. (3) The Common- - wealth Government hereby approves of the Company dealing in any manner it thinks best with the noils and other by-products - of the manufacture of wool tops but the Company shall not sell for export to other countries than Great Britain or her allies without first obtaining the consent of the Commonwealth Government. (4) The Commonwealth Government hereby agrees that it will upon request - by the Company give its consent to the sale by the Company of th following wool tops and no others, namely, any wool tops which the _ Company has contracted to sell by contract made or extended - prior to the date of these presents and any wool tops which the Company shall with the previous consent in writing of the Common- wealth Government contract to sell by contract or contracts made - or extended after the date of these presents. (5) For all wool pur- chased by the Company pursuant to the consent contained in clause 1 hereof the Company shall pay to the vendor the full appraised -

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Company will be the owner of its property, plant and general busi- ness, but the work of making wool tops is to be undertaken as agents for the Government. (f) Amortization of plant, &c., and depre- ciation are to be as allowed by the Commissioner under the War- time Profits Tax Act and Income Tax Act respectively. (g) The Central Wool Committee is to be empowered to appoint a resident inspector whose duty it will be to report to the Central Wool Com- mittee as directed by it. The inspector shall have no power to inter- fere with or direct the operations of the Company. (h) The Central Wool Committee is also to be empowered to appoint an auditor with full powers of inspection and report. (i) Both inspector and auditor are to be responsible to the Central Wool Committee alone. (j) If the Company objects to the nomination of either officer appeal may:he made to the Prime Minister whose decision shall be final. (k) The Company shall furnish balance-sheets within six weeks from the end of each accountancy period. (1) The Company is to have the right to sell its business to any responsible person or com- pany by consent of the Central Wool Committee. Power of refusal of consent is not to be unreasonably exercised. (m) The Company is as far as practicable to manufacture during the first accountancy period under the new agreement wool tops at the rate of six million pounds weight per annum. (n) The Company is to receive as remuneration over all costs of manufacture a sum of £64,000 per annum (free of war-time profits taxation at present rates) based on a six million pounds output of wool tops, but, as the Government is not prepared to grant the Company immunity from payment of war-time profits tax, the payments are to be expressed (after' dis- cussion with representatives of the Central Wool Committee) in the terms of a poundage payment on a tapered rate or otherwise, as the circumstances may demand. In order that this arrangement may be practicable without the poundage rate rising above 44d. per pound at any point the Company is to increase its ratio of shareholders' capital to debenture and other borrowed money. (o) As it is not anticipated that the Company will be able during the first accountancy period to output more than six million pounds weight of wool tops, the question of payment for any excess over

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Commonwealth, they are called simply "laws." But whatever ma be the meaning of the expression elsewhere, its collocation with the words " this Constitution " in sec. 61 leaves no room for doubt as to its meaning there. These words would be wholly unnecessary if the phrase " the laws of the Commonwealth " meant more than the laws made by the Parliament of the Commonwealth, for the phrase would then include the Constitution itself. In our opinion, an a not authorized by sec. 61 is not within the legal power of the Com- | monwealth Executive Government, and, even if done by the Sover or by the Governor-General, must invoke some authority other the Constitution. In this case we must assume that the various agreements were not mediately or immediately authorized by a Act of the Parliament. There remains only to consider wh any of them can properly be described as made in the execution maintenance of the Constitution itself. Each of the agreements either an agreement to give consent to a sale of wool tops by owner in return for a share of the profits of the transaction, by the parties to the agreement a "licence fee," or an agreement that the business of manufacturing wool tops shall be carried on by the defendant Company as agent for the Commonwealth in consider tion of receiving an annual stipend from the Commonwealth, or: combination of both of these agreements. It is clear that none of these agreements is made in maintenance of the Constitution, and it our opinion it is equally clear that none is made in the execution of the Constitution, because none of them is prescribed or even auth ized by the Constitution itself, and execution of the Constitution means the doing of something immediately prescribed or authorized by the Constitution without the intervention of Federal legislati It is true that sec. 64 of the Constitution directs that the Sover through his Ministers shall administer such departments of State the Governor-General in Council may establish, and they wo probably be authorized to make such contracts on behalf of Commonwealth as might from time to time be necessary in course of such administration ; but it is not pretended that the con- tracts now in question come within that category. If and so far as they were not made under the authority of Commonwealth legis- lation, they were made by or under the direction of the Prime Minister

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(2) Sources of Executive Power. - There are, apart from Common- wealth legislation, only two possible sources of executive power to make these agreements: (1) Imperial statute law, other than the Constitution Act; (2) authority derived from the Constitution itself, by reason of what it says or imports. As to Imperial legislation - other than the Constitution Act - there is none relevant. None has been suggested which confers on the Commonwealth Government any executive authority beyond that contained in the Constitution. Chapter IT. of the Constitution is headed " The Executive Govern- ment." Sec. 61 makes three declarations as to the executive power of the Commonwealth. Observe, it is not as to the Executive Government of the Commonwealth or as to the powers of the Govern- ment, but as to the "executive power of the Commonwealth." As to that " power," it declares that it (a) is vested in the Sovereign, (b) is exerciseable by the Governor-General as the Sovereign's representative, (c) "extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth." The reference to the Governor-General as the representative of the Sovereign must be read with sec. 2 of the Constitution, which con- stitutes him such representative. As to the first declaration it is a renewed statement of the law and introductory of what follows. Blackstone (vol. 1., p. 190) says: 'The Supreme executive power of these Kingdoms is vested by our laws in a single person, the King or Queen." In Halsbury's Laws of England (vol. vr., p. 318) it is said: "The executive authority is vested in the Crown as part of the prerogative." The second declaration need not be further considered now. The third is very important. It marks the external boundaries of the Commonwealth executive power, so far as that is conferred by the Constitution, but it leaves entirely un- touched the definition of that power and its ascertainment in any given instance. It no more solves the difficulty in the present case than would the words " for the peace welfare and good government

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of New South Wales" or the words "in and for Victoria" solve a similar difficulty in relation to the constitutional executive authority of those States. But the third declaration is an essential starting- point, and the extent it marks out cannot be exceeded. The argu- ment upon those words included various contentions ; as, for instance, that the executive authority of the Commonwealth Government embraced all the common law powers of the Imperial Government, and that "laws of the Commonwealth " included the common law - that once find a given subject matter within the ambit of the Con- stitution the legal power to make the agreement existed, and, what I regard as very crucial, though I do not agree with it, that the written words of the Constitution applied to sec. 61 form the only - necessary solving test. These contentions convince me that the proper construction of the enactment requires a deeper considera- tion than I should have otherwise thought necessary. Sec. 61, when carefully examined, simply applies to the new constitutional structure, the Commonwealth, but with the necessary adaptation, the basic principle of the law of the Empire that the King is indis- tinguishably the King of the whole Empire, but that the springs of royal action differ with locality. Where responsible government exists, it is an axiom of the public life of the British Commonwealth of Nations that the King's agents to regulate the exercise of his royal authority with respect to each Dominion are those chosen by the people of that Dominion. In the development of the Federal system in the Dominions, the doctrine adapts itself to the differ- entiation of ministerial agents for different purposes in the same locality. The principle, as I understand it, is expounded in R. y. Sutton (1), and is confirmed in Theodore v. Duncan (2). Those cases are instances, and others of an important character will be cited later, which illustrate the flexibility of the common law and its capacity to adapt its principles to the changing circumstances of the life of the community no less than to that of the individuals who compose it. It is the duty of the Judiciary to recognize the development of the Nation and to apply established principles to the new positions which the Nation in its progress from time to time assumes. The judicial organ would otherwise separate itself from

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The constitutional doctrine to which I have alluded has long been in essence an accepted thesis. For instance, see Hearn's Government of England, 2nd ed., p. 133. It has lately, as pointed out by Mr. Dawson Hall in the Journal of Comparative Legislation for October 1920, at p. 201, received very emphatic expression and application on the occasion of the British Empire Delegation in Paris in 1919. The united views of the Prime Ministers were thus expressed: '' The Crown is the Supreme Executive in the United Kingdom and all the Dominions, but it acts on the advice of dif- ferent Ministries within different constitutional units." That phrase '' within different constitutional units," is exactly expressive of the true position, and the doctrine I have stated is the key to the full understanding and interpretation of the third declaration in sec. 61 of the Constitution. When the Constitution was framed there were six separate Colonies, six separate " constitutional units," in Australia. In the aggregate they covered the whole territory of the continent of Australia. Each had its separate Constitution and laws, throughout the territory of each the Sovereign exercised the executive power of the Colony in accordance with the local Con- stitution, and by the advice of local Ministers, and that executive power, by whatsoever functionary exerted, extended to the execu- tion and maintenance of the Colonial Constitution and laws. But the limit of executive jurisdiction as to every Colony was its geo- graphical area, and that was easily gathered from its Constitution as a truth long familiar. Over the whole of that geographical area, and not beyond it, the local Government exercised execu- tive power - and normally the power was exclusive. But when the Federal Constitution of Australia was fashioned the new con- stitutional unit thereby created had to occupy (besides its own special territories) the same territory as the constituent States, and, so to speak, was superimposed upon them geographically. Two conditions had, therefore, to be satisfied. First, the constitutional domain of the new unit had to be delimited and distinguished from

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the respective constitutional domains of the States, and, next, that could not be done simply in terms of territory. It was found by applying to the territory certain powers - powers differently phrased with respect to the three branches of government. As to the executive power, it was delimited by attaching to the notion of territory, which is always connoted, the words "extends to the maintenance of this Constitution, and of the laws of the Common- wealth." In other words, the domain of the Commonwealth execu- tive power is a special domain of governmental action within the whole physical territory of the Commonwealth, and wherever else - as by covering sec. V. of the Constitution Act - its laws by Imperial authority operate. Of necessity, this domain is described but not defined in sec. 61. This constitutional domain is the field on which Commonwealth executive action lawfully operates. What I have said elucidates some of the contentions stated. It is clear now that there cannot be laid down as a rule of law that there is an unlimited application of the common law as exercised by the King's Govern- ment in England. Whatever of it is included in the " Constitution " belongs to the Commonwealth Government. And then it is also plain that the "constitutional domain" does not determine the existence or non-existence of the necessary power in relation to a given case, any more than marking the territorial domain deter- mines a similar question in relation to State executive action. Having ascertained in a given case that the constitutional domain has not been transgressed, we may have to go further and find whether on that field in the circumstances the power in fact exerted was lawful. To make my meaning quite plain: Executive action in relation to a Commonwealth law is clearly outside State juris- diction and clearly within the field of Commonwealth jurisdiction. If done at all, it is assumed that the Commonwealth Government should do it. Nevertheless, the statute must be examined in con- nection with the circumstances to determine the legality of what was done. And so with the provisions of the Constitution. Execu- tive action to execute or maintain the Constitution is clearly in the exclusive field of Commonwealth power, and no intrusion into the constitutional domain of the State. But the legal warrant for the particular step, if challenged by an individual affected, remains to

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(3) The Legality of the first three Agreements - There are, as I have said, only two possible sources of authorization to make the agreements apart from Commonwealth legislation, namely, (a) Imperial statute other than the Constitution Act itself, and (b) some authority derived expressly or impliedly from the Constitu- tion. As already observed, no Imperial statute has been suggested and I know of none relevant. Then, what authority can be pointed to arising out of the Constitution to support the entering by the Com- monwealth Government into the agreements? I do not confine myself to the mere words of the Constitution. I do not limit my search to express literal terms or to implication from the literal terms of the instrument. The mere fact of the creation of the Executive Government carries with it some constitutional conse- quences, unwritten, it is true, but nevertheless very real, that Courts recognize and that are included in the terms " maintenance of the Constitution." But it is a good starting-point to ask whether there is to be found in the written terms of the Constitution, regarding it as a self-operative enactment, anything which in express words or by reasonable implication of any of its literal terms gives authority to the Commonwealth Executive Government to make the agree- ments or any of them. One feature of outstanding importance, when the three first-mentioned agreements come to be carefully scrutinized, is that they relate to internal trade of the States as well as to inter-State and foreign trade. The agreement of March 1917, which was the basis of both the other two, made the promise to pay the stipulated proportion of profits a condition of consent to purchase and sell intra-State quite as much as inter-State or (as to sales) abroad. Primd facie, at all events, that would be beyond the permitted region of the Commonwealth executive power as delimited by the third declaration in sec. 61. But not neces- sarily in the circumstances. Legislation, if valid, might at the time have brought it within the jurisdictional area, and (being now

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for the moment that all other difficulties were absent, that an agree- ment for the purpose of regulating the trade in wool and wool tops was entirely within the competency of the Government by virtue of the prerogative, I still have to inquire whether that included the power to insist on receiving as the price of consent the proportion of profits stipulated for. In other words, I have to inquire whether the words of the Constitution vesting and delimiting the executive power contain, even in war time, an implication of power to include such a provision. As to the nature of the condition made that the Company should pay over a proportion of its profits as consideration for consent, the words of Lord Buckmaster in the Wilts Case are exactly applicable. His Lordship said (1) : - "* However the character of this payment may be clothed, by asking your Lordships to con- sider the necessity for its imposition, in the end it must remain a_ payment which certain classes of people were called upon to make for the purpose of exercising certain privileges, and the result is that | the money so raised can only be described as a tax the levying of which can never be imposed upon subjects of this country by anything except plain and direct statutory means." Lord Atkinson and Lord Summer gave a simple and direct concurrence. Lord Wrenbury delivered a short judgment to the same effect, but notwithstanding its brevity the learned Lord found it necessary to say it was " the - assertion of a right in the Executive to impose taxation" (2). Lord Sterndale gave a complete concurrence. It was vigorously urged for the Crown that here there was not a " levy " but an " agreement" for consideration. But that is only a recrudescence of the old struggle between the prerogative and the right of parliamentary control which is often thought to have ended long ago, but which finds its re-appearance even to-day, and the ideas by which the supremacy of Parliament was sought to be evaded are curiously found repeated in the Wilts Case, and even in the present case.

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tion was the basis of popular liberty. That alone, however, would have been of little use but for the accompanying power over appro- priation. The Report of the Committee on Public Moneys of 1857 (App. 3, p. 568) said: " The chain of historical evidence undeniably proves that a previous and stringent appropriation, often minute and specific, has formed an essential part of the British Constitution." This practice also dates back to a very early period. But, even then, there arises the necessity for control over the actual expenditure of the sums appropriated. So long as the Cabinet remained in fact, as it still is in strict legal theory, an independent organ of govern- ment - the Executive as distinct from the legislative organ, and co-ordinate with that and the judicial organ - the servants of the Crown as distinct from the representatives of the people - so long as Ministers owed their position to the royal choice and not to the approval of Parliament, the authority of the Executive to bind the Crown by contract depended, in the eye of the law, on ordinary legal considerations of the right of the Crown as a principal and at its own discretion to bind itself or its property. In these circum- stances, there entered no element of parliamentary approbation, short of formal enactment. In the early years of the nineteenth century a change began, and proceeded until Parliament, though obviously incapable of direct executive action, exercises complete control. Ministers, nominally the selection of the Crown, are in fact the choice of Parliament, and pre-eminently of that branch of Parliament that chiefly controls the finances. To Parliament, Ministers are responsible: the strict theory of the Constitution that Ministers are the servants only of the Crown gives way in actual practice to the acknowledged fact that they are really the executants of the parliamentary will, and must account to Parliament, and look for their authority to Parliament - authority express or tacit, arising from the confidence it gives to the administration. The theory that the Crown chooses its Ministers is overshadowed by

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. The question asked throws us back on the Constitution ; for the

Governor-General and the Executive Government are both the creatures of the Constitution ; and the Constitution is the creature
of the British Act 63 & 64 Vict. c. 12. The Executive Government _ has no powers except such as are conferred by or under this British _ Act, expressly or by necessary implication. Now, under sec. 2 of the Constitution, ''a Governor-General appointed by the Queen shall be Her Majesty's representative in the Commonwealth, and
shall have and may exercise in the Commonwealth during the Queen's pleasure, but subject to this Constitution, such powers and functions of the Queen as Her Majesty may be pleased to assign to him." Then, "under sec. 61, "the executive power of the Commonwealth is ested in the Queen, and is exerciseable by the Governor-General as the Queen's representative, and extends to the execution and ~ maintenance of this Constitution, and of the laws of the Common- wealth." It is not contended that the King has assigned to the
Governor-General any powers or functions, under sec. 2, which are additional to those referred to in sec. 61 or relevant to these con- tracts. We have seen a copy of the letters patent under the great seal, creating the office; and there the Governor-General is com-
manded "to do and execute all things that shall belong to his com- mand, and to the trust that We have reposed in him, according to 5 the several powers and authorities granted or appointed him by virtue of the Commonwealth of Australia Constitution Act 1900 and _ of these present letters patent and of such commission as may be issued to him under Our sign manual and signet or by Our order in 4 Our Privy Council or by Us through one of Our principal secretaries
of State and to such Jaws as shall hereafter be in force in Our said Commonwealth." The instructions issued under the royal sign 4 manual and signet, 29th October 1900, contain no additional relevant _ powers, though they vest in the Governor-General some of the _ royal prerogative of pardon for offenders. In short, the Governor- _ General is not a general agent of His Majesty, with power to exercise all His Majesty's prerogatives ; he is a special agent with power to

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be stated in plain terms. The Courts cannot assent to the view that ifa section in a taxing statute is of doubtful and ambiguous meaning, it is possible out of that ambiguity to extract a new and added obligation not formerly cast upon the taxpayer." Lord Atkinson, Lord Sumner, Lord Wrenbury and Lord Carson agreed with Lord Buckmaster's judgment. This is the latest statement of the law and perhaps the most explicit to be found as to the duty of the Court. It is entirely in accord with what the Judicial Committee, speaking by Lord Blackburn, said in Oriental Bank Corporation v. Wright (1), followed in Brunton v. Acting Commissioner of Stamp Duties for New South Wales (2). The ordinary meaning of " taxation," which is not altered by the Commonwealth Constitution, is the same in Australia as in England. In addition, the Bill of Rights is an Imperial statute in force in Australia by virtue of the Act 9 Geo. IV. c. 83, sec. 24. That Act is a definite law which, though, as May says in his Parliamentary Practice (10th ed., at p. 4), it " was but a declaration of the ancient law of England," stands nevertheless as an unrepealed enactment 'operating of its own force as a law and as part of the Constitution of England (see per Parker J. in Bowles v. Bank of England (3) ). _ And, except so far as altered by local statute, it is part also of the Constitution under which every Australian, whether as a member of a State or of the Commonwealth, lives and moves. This principle is applicable whatever use is intended to be made of the money, _ whatever body administers it, and whatever name is given to it. No distinction exists whether we say the money is a " tax" or a "burden," whether it is "imposed," "levied," "exacted" or "extorted." Nomenclature is immaterial ; substance is all impor- _ tant. The term "exaction" is applicable to all taxation, legal or illegal, the term "extortion " to illegal taxation (see Z'aswell- Longmead, 8th ed., pp. 352-353 ; Quick and Garran on the Constitution, p. 550). Even the Bill of Rights does not cover the whole field of taxation, because "taxation" extends beyond the levying of money

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power to make agreements depends on the regulations actually made

and the only relevant regulation is reg. 10. Now, this regulation is confined to the act of selling only - * No person shall sell any wool or tops except through or to or with the consent of the Commonwealth Government." The Commonwealth Government was desirous of carrying out its promise to "secure to the Imperial Government " (exhibit P9) in the exigences of war, the whole _ of the Australian clip of wool, merino as well as cross-bred ; and its first and main device was to provide that unless the wool-produce sold through or to or with the consent of the Commonwealth Gover ment, he could not sell at all. That is to say, unless the produce came voluntarily into the " pool," he could get no profit of his capi and exertions for the year. The Commonwealth Government to get the wool-producers to sell their wool to the Imperial Gov ment; and reg. 10 was the method whereby the Commonwe Government endeavoured, practically, to force the producers int 0 the pool. The consent to sell referred to is obviously a consent the producer or owner of the wool to sell, and, primd facie, the sent should specify the particular transaction, and the name of the vendor, at the very least. It appears from reg. 20 that purcha of appraised wool must be authorized to buy: but the consent referred to in reg. 10 is a consent to the vendor selling - like a licen to sell. Reg. 10 enables a vendor to sell not only through or to o1 with the consent of the Central Wool Committee but " or otherwise in accordance with these regulations"; and these last words are to some extent met by a sale to authorized buyers under reg. without the consent of the Central Wool Committee at all. But sti it is the sale that is to be allowed by regs. 10 and 20; and, inm opinion, there is nothing in the regulations enabling the Gove ment to give a general right to purchase. Reg. 20 is merely ancillary to reg. 10, and enables the person licensed to sell to find a suitable purchaser. A sale by the producer to the Imperial Governm through the Commonwealth Government as intermediary would, think, be treated as a sale " through" the latter Government. sale "to" the Commonwealth Government by the producer wa another course permitted. A sale "with the consent" of the Commonwealth Government was another course. It is on this

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The fact that a consent has still to be given at the time may make the agreement nugatory : but if clause 4 has any operation further than contemplated by reg. 10, that operation is not permitted by the regulation. But clause 7 creates another difficulty. It provides, as to the net earnings of the Company for each accounting period, that the Company is to hold one-half of the net earnings at the disposal of the Government ; and (clause 10) the amount for the Government is to be paid forthwith into a bank to the wool top manufacturer's account to be " disposed of as the Commonwealth Government shall direct." That is to say, the Government, being entrusted with the power to give or withhold consent to sales, uses that power for the purpose of securing money for itself - gives its consent on the terms of receiving half the profits. If a trustee or other person entrusted with such a power were to exercise it in such a fashion, the Courts would not hesitate to treat such a bargain as an abuse of the power - what is called a " fraud on the power." to dispose of a church preferment cannot bargain for an advantage to himself (Richardson v. Chapman (1) ); a municipal corporation, trustee for a school, cannot grant a lease containing a covenant that the lessee shall grind his corn at the corporation mill (Attorney-General v. Stamford (2) ); trustees for a school cannot lease to one of the trustees (Attorney-General v. Dixie (3) ); governors of a school cannot lease to one of the governors (Attorney-General vy. Earl of Clarendon (4)): a parent with a power to appoint among children cannot bar- gain with a child for purchase of a share appointed (Cuninghame v. Anstruther (5) ); a parent with such a power cannot appoint money to a daughter to meet his burial expenses (Hay v. Watkins (6) ); a tenant for life having statutory power to lease cannot lease to a trustee for himself (Boyce v. Edbrooke (7) ). The same principle applies to all discretionary powers, such as consents. As Farwell puts it (Farwell on Powers, 3rd ed., p. 463): '" Trustees must exer- cise any discretionary power they may have (e.g., to consent) bond fide for the benefit of the persons for whom they are trustees" (Eland v. Baker (8); and see Strange v. Smith (9); Clarke v.

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Parker (1); Mesgrett v. Mesgrett (2) ). Most of these cases relate to trustees: but the principle is not confined to trusts. In the recent case of Vatcher v. Paull (3) Lord Parker of Waddington, in the Privy Council, explained the position : - ''The term fraud in connection with frauds on a power does not necessarily denote any conduct on the part of the appointor amounting to fraud in the common law meaning of the term or any conduct which could be properly termed dishonest or immoral. It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power. Perhaps the most common instance of this is where the exercise is due to some bargain between the appointor and appointee, whereby the appointor, or some other person not an object of the power, is to derive a benefit. But such a bargain is not essential. It is enough that the appointor's purpose and intention is to secure a benefit for himself, or some other person not an object of the power. Insuch a case the appointment is invalid." In commenting on these words Farwell L.J. says (Farwell on Powers, 3rd ed., p. 458) : - " It will be observed that the essential notion is disposition beyond the scope of the power, not breach of trust by the donee, though it is not unusual to speak of the donee of a limited power as being in a fiduciary position. His position is referable to the terms, express and implied, of the instrument creating the power and the implied obligation not to appoint for an ulterior purpose, and is not in truth founded, like the position of a trustee, upon a state of conscience imputed to him by Courts of equity. But there is a strong analogy between the obligation imposed on a donee by the terms of the instrument creating the power and that imposed upon a trustee by the terms of the instrument creating the trust." The same prin- ciple, indeed, seems to be at the root of the numerous cases decided by Courts of common law, in which a by-law has been held " un- reasonable ° - rather an unhappy term. For instance, in Calder and Hebble Navigation Co. v. Pilling (4) a canal company had power to make by-laws for the good government of the company, and for

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in my opinion, is invalid also - and 4 fortiori. For the Common wealth Government refused to exercise its power to give consents to the sale of wool tops, under reg. 10, unless and until the Company agreed to let all the wool tops manufactured by the Company a 31st August 1918 be the property of the Commonwealth, and unl the Company undertook to carry on the business of the Cony as agent for the Government at an annual remuneration. Government also refused even to consider the giving of any mor consents until the Company agreed to pay all that was due und the previous agreements. I do not concern myself with sund questions as to the execution of this third agreement, or with # absence of the authority of the Governor-General in Council, or of © Parliament, or with the question as to whether in law this agreement contained in fact two independent agreements, one for the past transactions and one for the future. It has been found as a fact by my brother Zsaacs that the clauses 2, 3 and 4 of the new agree: i ment as written (as to back payments) were meant to be an inde- pendent agreement from clauses 1 and 5 (as to future payments) ; and I accept that finding. But this still leaves it open to us to say_ whether in law they must be treated as one, regard being had to the construction of the document itself. I am strongly inclined to think that the document on its true construction compels us to treat the two agreements as one; but even if we are to accept it. that there were two separate and independent agreements as a matter of law, the agreement as to the future is invalid on each of the three grounds which I have stated, and the agreement as to the past is invalid as being in furtherance of the previous agreements: which were illegal. z I cannot refrain from comment on the pleadings in this ease. They, at all events the defendant's pleadings, are so long, rambling. and diffuse, especially with the added particulars, as to add very - considerably to the task of the Court and the protraction of the pro- ceedings. They constitute rather a discursive argument, with reckless reiterations, and they are worse in this respect than any pleading

Commonwealth and the Central Wool Committee v Colonial Combing, Spinning and Weaving Company Limited [1922] HCA 62

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Judgment (303 paragraphs)

Cited By (2)