Trade Practices Commission (Cth) v Tooth & Co Ltd - [1979] HCA 47 - HCA 1979 case summary — Zoe

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Trade Practices Commission (Cth) v Tooth & Co Ltd

[1979] HCA 47

High Court of Australia|1979-07-01|Before: Aickin JJ

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Source facts

Court

High Court of Australia

Decision date

1979-07-01

Before

Aickin JJ

Source

Original judgment source is linked above.

Judgment (221 paragraphs)

[1]

For the reasons I have expressed, I think the majority of the Full Court of the Federal Court were correct in the answer which they gave. Accordingly, I would dismiss the appeal.

[2]

The facts of this case and the provisions of the legislation in question are set out in the judgment of my brother Aickin.

[3]

The words of s. 47 (9) of the Trade Practices Act 1974 Cth, as amended ("the Act"), which must be read in the light of s. 4 (2) (c) (i) and s. 4F (b), are unfortunately not altogether precise. In particular the reference to "another party to the lease" creates a difficulty, since the sub-section is dealing with the refusal to "grant or renew" a lease, and in strictness there is of course no party to a lease that has not come into being. The distinction drawn between the grant and the renewal of a lease suggests that "grant" is intended to refer to a case in which no lease is in existence and "renew" to the case in which there is an existing lease which the lessee seeks to have extended for a further period. Technically, the word "grant" would have covered both cases, since a renewal will involve a new grant. The provisions of s. 47 (9) are analogous to those of s. 47 (8). Section 47 (8) deals, inter alia, with the grant or renewal of leases on certain conditions, whereas s. 47 (9) deals with the refusal to grant or renew leases for reasons that correspond to those conditions. In s. 47 (8), the words "another party to the lease" clearly refer to a party to the lease actually granted or renewed, and in s. 47 (9) in my opinion those words similarly refer to a party to the lease which the corporation has refused to grant or renew. Although, as I have indicated, if there has been a refusal to grant a lease, there is in truth no party to the lease, what in my opinion is meant is a person who would have been a party to the lease had it been granted. But even if this construction were wrong, I could not accept the view that the expression "grant or renew" was intended to distinguish between the re-grant of an existing lease on new terms and the re-grant of an existing lease on the same terms as before.

[5]

In any case, the law is not, in my opinion, one with respect to the acquisition of property within s. 51 (xxxi.). I fully accept that the powers given by the other paragraphs of s. 51 do not authorize legislation for the acquisition of property (W. H. Blakeley & Co. Pty. Ltd. v. The Commonwealth [4] ; Attorney-General (Cth) v. Schmidt [5] and cases there cited) and that the Court will not permit the adoption of "a circuitous device to acquire indirectly the substance of a proprietary interest without at once providing the just terms guaranteed by s. 51 (xxxi.) of the Constitution when that is done" (Bank of New South Wales v. The Commonwealth [6] ; and see Minister of State for the Army v. Dalziel [7] ). Further, s. 51 (xxxi.) is not limited to acquisitions by the Commonwealth (McClintock v. The Commonwealth [8] ; Bank of New South Wales v. The Commonwealth [9] ;P. J. Magennis Pty. Ltd. v. The Commonwealth [10] ). A law of the Commonwealth requiring one person to grant a lease to another on other than just terms would, generally speaking, be invalid. However, not every compulsory divesting of property is an acquisition within s. 51 (xxxi.). Thus it has been held that laws providing for the forfeiture of prohibited imports (Burton v. Honan [11] ), the compulsory payment of provisional tax (Federal Commissioner of Taxation v. Clyne [12] ) and the application of the property of former enemy subjects as reparations (Attorney-General (Cth) v. Schmidt [13] ) are not within s. 51 (xxxi.). Other laws to which s. 51 (xxxi.) obviously does not apply are those for the imposition of tax, the sequestration of the property of a bankrupt or the condemnation of prize (Attorney-General (Cth) v. Schmidt [14] ). I am not sure that a completely satisfactory explanation has yet been given of the principles by which it is to be determined which laws do, and which laws do not, fall within s. 51 (xxxi.). With great respect I doubt whether the suggestion of Dixon C.J. in Attorney-General (Cth) v. Schmidt - that the section does not affect "anything which lies outside the very general conception expressed by the phrase "use and service of the Crown" " - fully expresses the ground of distinction. It appears to me that there are cases in which s. 51 authorizes the compulsorily divesting of property in circumstances in which no question of just terms could sensibly arise - for example, it would be absurd to say that the legislature could make provision for the exaction of a fine, or for the imposition of a forfeiture of property used in the commission of a crime, only on just terms. Whatever explanation may be accepted, the provisions of s. 47 (9), which prohibit a corporation from refusing to grant or renew a lease for the reasons stated, seem to me to be of the same nature as provisions for penalty or forfeiture. As at present advised I doubt whether the Federal Court would have power to grant an injunction, which would be mandatory in effect if not in form, to compel the grant or renewal of a lease, but the heavy penalties provided for the contravention of the sub-section may be regarded as practically compelling a corporation to grant or renew a lease if a substantial reason for not doing so would be one of the reasons mentioned in s. 47 (9). If s. 47 (9) is regarded as having the effect that in certain circumstances a corporation is obliged against its will to grant or renew a lease, it only has that effect where the corporation is engaging in the practice of exclusive dealing forbidden by the sub-section, in circumstances in which its conduct has the purpose, and has, or is likely to have, the effect of substantially lessening competition. The sub-section is not merely a device to compel a corporation to divest itself of a proprietary interest and its effect is to deter or punish forbidden conduct. It does not provide for the acquisition of property within s. 51 (xxxi.). In any case, as I have said, the section does not oblige the corporation to grant or renew a lease on other than fair commercial terms.

[55]

Of these four consequences the first, that of restricting severely the operation of the sub-sections, appears readily enough. If "renew" is to be confined to the case of a new lease containing precisely the same terms (other, perhaps, than the option of renewal itself) as those in the old lease, it will not apply whenever an option or covenant for renewal in the original lease provides, for example, for some alteration in, or review of, the rental for the renewed term, or for a duration of the renewed term different from that of the original lease. Indeed any difference whatever in any term or covenant of the renewed lease will apparently be sufficient to take it out of the operation of the sub-sections. Nor can, I think, this result be overcome by regarding the provisions as to grants of leases as wide enough to cover renewals whenever the terms are different in any respect from those in the original lease. In these sub-sections "grant" is contrasted with "renew" and it is not, I think, permissible in their interpretation to exclude from the latter, and catch up in the former, all these cases, common in periods of inflation, of options to renew at increased rentals, or at rentals subject to review, whether by arbitration or otherwise. All these must, I think, be treated as renewals. It is unnecessary to determine whether every case of a new term immediately following upon an expired term held by the same lessee involves a renewal for the purposes of sub-ss. (8) and (9): or whether, on the contrary, identicality of lessee is not enough, the new term, to be a renewal, having to arise from the exercise of some option or from some covenant in the old lease. So long as renewals are not treated as necessarily involving the same rental as was payable under the original lease there will be no occasion to distinguish between grants and renewals since neither will involve relevantly different consequences. Instead they may be regarded, as I believe they should be, as together designed to cover the whole field of the creation of leasehold terms, renewals being specifically mentioned so to ensure that no cases will exist to which "grant" might be thought inapplicable.

[156]

Section 47 (9) involves some problems of construction not directly connected with the constitutional question which is the basis of this appeal, as well as some which are related to that question. Sub-section (9) speaks of a refusal by a corporation "to grant or renew", or the exercise of "a power or right to terminate", a lease of land "for the reason that another party to the lease has acquired or has not agreed not to acquire goods directly or indirectly from a competitor of the corporation " The use of the expression "another party to the lease" presents no difficulty where the prohibited act is the exercise of a power or right to terminate. There is then obviously someone who occupies the position of "another party to the lease" whose conduct may constitute a breach of covenant and thus give rise to the power to terminate and may also provide the reason for the wish to exercise the power to terminate. Where the question is one of a refusal to renew, it is no doubt natural enough to refer to the lessee under an original lease the term of which has not expired as "another party to the lease", though less easy to do so if the former lease has expired. However in the case of a grant of a lease de novo whether or not a person who had prior thereto been the lessee, it is not easy to see what is meant by "another party to the lease". It was suggested by the Solicitor-General that the phrase meant an "intending lessee" but, with respect, that neither clarifies the expression used in the Act nor substitutes a more precise one. For my part I am unable to give any precise meaning to the expression "intending lessee" unless it refers to a party to an agreement for a lease, to whom no grant has yet been made, but that seems unlikely to be what was intended by the draftsman or by the Solicitor-General. Again there seems no basis for regarding a person who has never held a lease from a relevant landlord but hopes to obtain one, or has applied for one, as "another party to the lease" or indeed as an "intending lessee". The Solicitor-General suggested that the section deals only with persons who had previously been a tenant. There are obvious difficulties in applying the provision to the grant of a lease de novo to a person not then the existing or an overholding tenant. The submission did not expressly confine the provision to such persons as had been tenants at the time of or immediately prior to the relevant prohibited act, but if it were so limited that problem of construction would be solved. On the whole I think that is the proper construction of the provision.

[177]

It was not argued in the present case that the Commonwealth Parliament has any power to legislate for the acquisition of property except under s. 51 (xxxi.). Legislation under the provision must, in order to be valid, be legislation which provides for just terms. If par. xxxi had not appeared in s. 51, there is little doubt that other paragraphs of s. 51 would have been interpreted so as to authorize the Parliament to make laws for the acquisition of property in relation to the subject matters of those paragraphs. For example, under the power to legislate with respect to lighthouses and bankruptcy, there is no doubt that the Parliament would have been entitled to legislate for the purpose of acquiring land for the erection of lighthouses and bankruptcy courts. The paragraphs of s. 51 should not, in my opinion, in general be read as limiting each other in any way. But there are special characteristics of par. xxxi which raise special questions with respect to the power to legislate for the acquisition of property. Par. xxxi gives express power to legislate for the acquisition of property "for any purpose in respect of which the Parliament has power to make laws". This phrase is used in a general descriptive sense and, in its setting, may fairly be interpreted as referring to all other matters with respect to which the Parliament has power to make laws and, therefore, as including the thirty-eight subjects referred to in the other paragraphs of s. 51, as well as other subjects mentioned in other sections of the Constitution. Thus the phrase, "purpose in respect of which the Parliament has power to make laws", incorporates by reference all the other subject matters of the legislative power of the Commonwealth. (Perhaps the power to make laws for the government of territories (Constitution, s. 122) should be excepted from this statement (cf. R. v. Bernasconi [12] ), but it is not now necessary to express an opinion upon that question.) In relation, for example, to defence, par. xxxi means that the Parliament may legislate for the acquisition of property on just terms for the purpose of the naval and military defence of the Commonwealth and of the several States and the control of the forces to execute and maintain the laws of the Commonwealth. When par. xxxi is thus construed in relation to a particular purpose it must, I think, be regarded as limiting the legislative power with respect to the acquisition of property for that purpose. In other words, the terms of par. xxxi are such that, for example, the power to legislate with respect to defence cannot be interpreted as including a power to make laws for the acquisition of property upon any terms which commend themselves to Parliament, whether they are just or not. In relation to defence, as in relation to all other legislative purposes, an express and specific power to make laws is given by par. xxxi and that power is limited by the inclusion of the words "on just terms". Accordingly, I am of opinion that the only power of the Commonwealth Parliament to legislate with respect to the acquisition of property for defence purposes is that conferred by s. 51 (xxxi.). 1. (1943) 67 C.L.R. 314. 2. (1943) 67 C.L.R., at pp. 317-318. 3. (1943) 67 C.L.R., at p. 325. 4. (1943) 69 C.L.R., at p. 331. 5. (1915) 19 C.L.R. 629.

[211]

It is necessary to return to the actual decision in Attorney-General (Cth) v. Schmidt [14] in order to relate it to the general principles stated in the judgment and in earlier decisions. It dealt with an attack upon the validity of ss. 13C and 13D of the Trading with the Enemy Act 1939-1952. At the outbreak of war in 1939 a firm known as Dohnert Müller Schmidt & Co. was carrying on business as wool buyers in Australia and elsewhere. The proprietors of the firm were all resident in Germany, although one appears to have been resident also in Australia, and they were all of German nationality. They were thus enemy aliens. The Trading with the Enemy Act authorized the Minister to apply to the High Court for the appointment of a controller of certain enemy firms and companies and conferred upon the High Court power to appoint such a controller and to confer on him powers including those of controlling, conducting or discontinuing businesses owned by enemy aliens. On 16th October 1939 Starke J. had made an order appointing a controller of the business of that firm during the then state of war or until further order. The controller conducted the business only for the purpose of winding it up and realizing its assets, the proceeds of which in due course were paid into court. On 9th July 1951 the formal state of war with Germany was terminated but the notification thereof amongst other things reserved the right of the Commonwealth to retain any money or property subject to control by virtue of the Trading with the Enemy Act. By a combination of various amendments to that Act, it was declared that regulations might be made to give effect to Art. 6 of an Agreement on Reparation from Germany arrived at in 1945. The legislation was such that, if an order were made under that Act, the moneys would be applied as German external assets in accordance with Art. 6 of the Agreement. The validity of that provision was attacked on a number of grounds including reliance upon s. 51 (xxxi.). I have already referred to the passage in the judgment of Dixon C.J. in which the nature of the legislation is examined, and I add a reference to the judgment of Taylor J. and quote the following passage [15] :