Commonwealth v Colonial Ammunition Company Limited [1924] HCA 5

Commonwealth v Colonial Ammunition Company Limited [1924] HCA 5 - HCA 1924 case summary — Zoe

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to the conference of 8th December, it will be seen that at one time the intention was clear that before the matter was to be regarded as a concluded bargain there should be a formal agreement executed. But on 8th December a conference took place, and circumstances altered. Prior to that conference the proposed arrangement. as previously mentioned, was to lease the Company's premises, &c., only until the termination of the supply contract on 30th June 1922. The Company desired the lease to go back to Ist July 1920; the Government declined that as impracticable, and proposed to begin on Ist January 1921 and end on 30th June 1922, and stated its willingness to make special arrangements as from Ist July 1920 to 31st December 1920. The proposal to begin on Ist January 1921 so as to end the supply contract on that date is of great importance in this regard. The Company agreed to the alteration of the com- mencement date, but other matters were in debate. When on 8th December the conference took place, it appears that some points were mutually assented to and others left in disagreement. It appears that the parties had agreed provisionally to the lease being for seven years from 30th June 1920, with six months' notice thereafter ; even then the matter was, as we think, intended to be conditional and subject to execution of the agreement. But again intervened an interview on 13th December, and then it was that terms were agreed to, which still, as we think, stand. There was written a letter (Ex. J) dated 14th December, from the Company to the Commonwealth, assenting to the alterations in the previous memor- andum; and on the 17th the Commissioner (by Ex. K) replied, setting out in extenso, the terms as amended. By clause 2 the lease was to be for seven years from Ist January 1921, with subsequent six months' notice. By clause 7 it was provided : " On Ist January 1921 the Company to relinquish and the Commonwealth to assume control and management of works and employees.' By clause 6 it was provided (inter alia) : - '* On taking possession of the factory, the Commonwealth to pay a deposit of £25,000 on account of stock taken over. Stock to be taken, cost price to be determined, and the balance of purchase-money paid to the Company on or before 3ist January 1921; so that stock might be taken after going into

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Indemnity Clause - The next, an equally vital question so far as the respondent's claim is concerned, is whether there was included, among the terms in fact agreed to, a stipulation which is couched in the following actual words : "It is understood that the Department will take over the Company's obligations thereunder " - that is, under the service agreements enumerated in Ex. L (17th December 1920), and interpreted by the respondent as set out in par. 4 of the statement of claim. We have already stated some of the diffi- _ culties in the way of reconciling the alleged obligation contained in par. 4 and the acts alleged as breaches with principles imposing liability for those acts on the Commonwealth towards the Company. No tripartite agreement is suggested. But the liability has been briefly described as "indemnity." And we must ask what that involves. Tt means that the Commonwealth undertook, unconditionally and under all circumstances, that the Company might henceforth disregard its service agreements, notwithstanding those agreements remained intact obliging the Company to employ the men and the men to serve the Company. And it means that, for that disregard of its engagements by the Company, the Commonwealth would, as between the Commonwealth and the Company, bear the brunt of whatever just claims the employees might make for the Company's breach of obligation, leaving it to the Commonwealth to choose whether it will save itself by engaging the employees (if they were willing) and thus annulling or reducing loss, or whether it will bear the loss in full by not employing them. But if the employees refused to engage with the Commonwealth, the Commonwealth would still be liable to indemnify the Company. That was the argument pressed upon us. That, however, would connote - as we think and as the learned Chief Justice of Victoria, who agreed with that view, holds - that clause 8 of the heads of agreement, being largely inconsistent with the stipulation, must to the extent of

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the Minister unnecessary, unfit, or incompetent." It would have been an astonishing thing if the Defence Department had. without direct _ authority of a statute, assumed to bind itself to employ any persons in its ammunition factory for several years, whatever their future fitness or even loyalty might be. Indeed, such a bargain unauthorized by statute would not, in our opinion, have been lawful. But on the facts two points stand out, in our opinion, clear: (1) the only method by which the Commonwealth undertook to do anything that would relieve the Company was by engaging the services of the skilled staff, that is, by employing them as Commonwealth servants, and (2) even - that method was expressly made subject to the high necessary public consideration of not taking or keeping anyone found unnecessary, - unfit, or incompetent. There is not a syllable to indicate that the terms definitely agreed to on 13th December and referred to specifically in both Ex. J (the Company's letter) and Ex. K (the departmental Jetter) were ever altered or qualified, On the con- trary, Ex. L referring to Ex. K itself expressly " confirms the heads | of agreement as therein contained" and states that the Company - "is prepared to execute the agreement in due course." That, so far, L includes clause 8 in its entirety. After referring to projected acts in carrying out the agreement on those terms, the letter proceeds to say: " Regarding clause 8 of the heads of agreement, we have to inform you that the following members of the staff are under engagement to this Company for the following terms." Then follow names and dates, and nothing more as to obligations. So far again, clause 8 is reaffirmed, and the information is given as to facts relevant to that clause. Finally, says the Company : " These are all the service _ agreements entered into by the Company," followed by the w "and it is understood that the Department will ¢ake over the Com- pany's obligations thereunder." "' It is understood " - hy whom ? Obviously not by the Commonwealth so far, unless the true con- struction of clause 8 so requires it. The Commonwealth Departme seeing the acknowledgment of the accuracy of the heads of agreement as tabulated, seeing the express reference to clause 8 and to service agreements in connection with it, and knowing that the Common- wealth was promising to engage the employees subject to the e qualifications, might well think - to put it very mildly - and clearly

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making it binding on the Commonwealth. On the argument before - us Mr, Dixon declined to place the matter on the ground of ratification, - and stated that he did not regard Parliament as a principal. He was right in this. If Parliament is the principal in relation to the - contract, what is the position of the Crown ? Government contracts - are made by or for the Crown by its appropriate agents and in the - appropriate manner. Parliament is not the Commonwealth. It : does not represent the Commonwealth in the making of contracts, - It is the legislative not the executive organ of the Commonwealth. It authorizes executive action, prescribes its limitations and conse- f quences, or ratifies in a legislative sense, and, in short, makes the law of the contract, but it is not a party to a contract itself. With great respect, the word "ratify " has been used in an inapplicable sense. Where a person ratifies a bargain, it is assumed that the bargain was professedly made for him as principal, and that the law permitted such a bargain when it was in fact made. Where Parliament ratifies a bargain, it is necessarily assumed er natura rerum that the bargain was not professedly made for the Parliament as principal, and it is also assumed that the law did not permit such a bargain when it was in fact made. The only way in which - Parliament could be said to have ratified the contract - that is, to have made the contract binding on the Commonwealth - is by having expressly or impliedly validated it. It has not done so expressly. Has it done so by implication? Is the legislative process of granting supply to the Crown and of appropriating public moneys to meet that supply a validation of every bargain, of every act, tort, or even crime - as it might happen to be at the time - involved in the detailed estimates for which the money is voted? We think not. From the inherent nature of the parliamentary process of supply and appropriation such a conclusion cannot be drawn. This is emphasized when we see how, with adaptations, this time- honoured process has been embodied in the written Constitution of - the Commonwealth. The object of supply and appropriation is simply to furnish the Crown with author and opportunity to obtain the money it desires for the government of the country. The Committee of

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Judgment (141 paragraphs)

H. C. or A. respondent, but merely negotiation. The whole matter was subj 1923-1924.