Miller v Commonwealth [1946] HCA 42

Miller v Commonwealth [1946] HCA 42 - HCA 1946 case summary — Zoe

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to shares, stock and debentures, to suggest that the circumstances of intending purchasers should be inquired into, or which manifests any desire to avoid inflation, except, perhaps, remotely, if they stood alone, sub-regs. (7) and (8) of reg. 7; nor do they show a desire to or cause a diversion of money from shares, stock and debentures to war loans or other government securities ; therefore the observations in Shrimpton v. The Commonwealth (1) cannot be applied to these regula- tions. Shares give the holder an interest in profits and assets, both of which are controlled. The essential difference between shares on the one hand and commodities and land on the other hand is price- fixing. The controlling of the price of shares has no effect upon the cost of living. The Regulations show no regard to the necessities of the war situation. Even if sub-regs. (5) and (6) of reg. 7 were severable and valid to deal with speculation, the other Regulations go further and set up a scheme that has no real or specific relation tothe war. These regulations did not at any time have any relation to the war. But assuming that there was a relation to the defence power, the question which now arises is whether the area of the defence power has now contracted. This matter was fully debated in Dawson's Case (2). In short the defence power has now sufficiently diminished to call for a decision that the regulations can no longer be justified. Speculation and inflation are not now related to defence; they are matters of social legislation for the States. These proceedings come before the Court by way of demurrer. The defen- dants have not alleged any facts to show that these regulations were necessary for defence. Economic and social re-adjustment do not come within the scope of the defence power. A line must be drawn between the defence power and legislation for economic and social re-organization. It is not sufficient to continue the regulations in force in order to deal with exigencies of peace. It does not follow that because economic and social situations had to be dealt with during the war under the defence power there is still power to so deal with them after the war. The test is the same as for new legis- lation. The regulations ceased to have effect in March 1946 and therefore the operation thereof was not and could not be extended by the National Security Act 1946 which commenced in May 1946. Alternatively, any extension of the regulations by the Act of 1946 was ineffective.

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Mason K.C. (with him Holmes), for the defendants. The correct approach to the problem before the Court is to consider the position when the Regulations were brought into force ; to consider whether it was proper then to prevent gambling and speculating in shares, stock and debentures on the Stock Exchange. The Regulations deal with the following positions : - (i) price-fixing - under reg. 7 (7); (ii) the necessity for the Treasurer's consent in three events only, namely, (a) if shares, stock or debentures not held by the vendor for the specified period; (b) where a person proposes to lend or borrow the purchase price; and (¢) where the proposed sale would result in the purchaser holding shares or stock representing more than twenty-five per cent of the issued capital of the company con- cerned : reg. 7 (2), (6). The necessity for obtaining the Treasurer's consent to the sale of shares, stock or debentures not held for the specified period was designed to prevent speculation and "day to day" gambling. Such speculation and gambling would cause tremendous repercussions on the economic position of the Common- wealth. The need to avoid those repercussions in 1942 was a suffi- cient nexus between the prohibition and the defence power. An examination of the Regulations as a whole leads to the irresistible conclusion that their scope and intendment was an economic plan. The Regulations are reasonably capable of being construed as a valid exercise of the defence power (Shrimpton v. The Commonwealth (1) )b Although the discretion exercisable by the Treasurer is expressed in reg. 9 (2) to be an " absolute discretion " it is "" not arbitrary and unlimited and must be exercised bona fide" and " for the purposes of the regulations " (Shrimpton v. The Commonwealth (2) ). Section 46 (b) of the Acts Interpretation Act 1901-1941 operates to keep the scope of the discretion within the power. The price-fixing provisions in sub-regs. (7) and (8) of reg. 7 are entirely severable. The " pegging " of prices was intended to prevent either booms or slumps on the Stock Exchange, a nerve centre of the financial system of the Commonwealth. That being the object in 1942, it was a proper exercise of the defence power. The test between an investor and a speculator was the period during which the shares, stock or deben- tures were held. The question then arises : Ts it necessary now, at the time of these proceedings, that an order should be made under reg. 7 (7)? Is such a requirement unreasonable ? Regard cannot be had only to shares, stock or debentures; consideration must be given also to land, goods and other commodities. All form part of the economic plan. It is admitted that price-fixing in respect,

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of commodities is still within the defence power. That must mean that the war has created an unnatural or unusual economic structure, that is to say, a shortage of commodities and a surplusage of money, conditions which may easily and readily lead to inflation with its attendant harmful or disastrous effects upon the Commonwealth. Price-fixing is designed to prevent inflation, and the inflationary condition is a direct result of the war. There thus being a power now to deal with the price of commodities, so also is there power to deal similarly with shares, stock and debentures. In the circum- stances it is not unreasonable, in order to prevent speculation in shares, stock or debentures and to prevent an artificial value being given thereto, that the consent of the Treasurer should be necessary where it is proposed to borrow or lend money for the purchase of shares, stock or debentures. Borrowing is clearly related to price. The continued operation of the Regulations was not unreasonable (Aus- tralian Textiles Pty. Ltd. v. The Commonwealth (1)). The only complaint discoverable in the statement of claim is in respect of the fixing of a maximum price, that is, price-fixing. Even assuming that the National Security Act did not contain s. 19 and that Treaties of Peace had been signed, it could not be said that upon the termina- tion of the war the whole of the control structure built up by the Act and the regulations collapsed and ceased to operate. There must be a " tapering-off" period otherwise complete chaos would result. The time has not been reached when it would be unreasonable to assert that the control and stabilization of prices are unnecessary for the defence of the Commonwealth. The true position is that Treaties of Peace have not yet been signed and units of the Common- wealth Defence Forces are still on service overseas. Further, by the National Security Act 1946, Parliament enacted that the regula- tions should cease to operate at midnight on 31st December 1946.

At a glance

Court

Decision date

Before

Source

Judgment (157 paragraphs)

Dixon J. This demurrer was argued shortly after the demurrer H- ©. oF A. 1946.