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Beal v Marrickville Margarine Pty Ltd [1966] HCA 9; (1966) 114 CLR 283 (3 March 1966)

CATCHWORDS

HEARING

DECISION

2. The company pleaded not guilty to the information. When the trial before the magistrate began no evidence was called but the magistrate received as evidence, by agreement between the parties, a statement consisting of facts admitted by them respectively and the documents annexed to it. The information and the evidentiary materials were transferred to the Registry of the High Court in accordance with the order made under s. 40 of the Judiciary Act. At the hearing of this reference a statement of further admitted facts was by consent of the parties received by the Full Court. The question to be decided is whether the company is liable to be convicted upon the evidentiary materials which have been mentioned. (at p297)

3. The documents are as follows: 1. A licence to manufacture table margarine granted by the Minister of Agriculture to the company on 1st July 1964 for a period of twelve months. The relevant condition in the licence was inserted to make it comply with s. 22A (6) (a). The condition was to the effect that the company should not manufacture during the currency of the licence table margarine in excess of a specified maximum quantity - this was 2,166 tons. 2. A form of order of the company's own design used by its inter-State customers, all of them but one being its own subsidiaries. 3. A batch of returns which the company made under s. 22 (4) showing the particulars of the manufacture of margarine during July to November 1954. (at p298)

4. The material words of s. 22A (1) (d) are: "No person shall manufacture or prepare any margarine in contravention of any condition of the licence held by him". The informant alleges in effect that the company manufactured in its factory at Marrickville (in New South Wales) during the said months, a greater amount of table margarine than 2,166 tons. The meaning of the terms "margarine", "cooking margarine", "table margarine" are defined by s. 2 (1) of the Act. (at p298)

5. The statutory returns prove that in fact the company disregarded the condition of the licence allotting it the quota of 2,166 tons. (at p298)

6. The substantial question arises under s. 92 of the Constitution. It is whether or not the company was free by virtue of s. 92 to ignore the limitation on manufacture imposed by the licence. The company impugns the constitutional validity of the whole of s. 22A. Sub-section (1) (d) is an inseparable part of that enactment. (at p298)

7. The central words of the form of order are: "Please manufacture in your factory and supply to us the following quantities of margarine in good order and condition". It would appear that the company adopted this form of order to differentiate the case from Grannall v. Marrickville Margarine Pty. Ltd. [1955] HCA 6; (1955) 93 CLR 55 . See specially pars. 10, 11 and 12 of the case stated (1955) 93 CLR at pp 57, 58 . (at p298)

8. During the relevant period orders in the form mentioned sent by the company's inter-State buyers were carried out in accordance with their terms. In carrying out such an order the whole process of manufacture was gone through specially to fulfil the order: the quantities of margarine were then packaged and despatched to the buyer. In the case of a batch of orders the procedure was similar. (at p298)

9. It is said that the flow of inter-State trade during that period began at the first stage of manufacture. A number of stages had to be gone through before edible margarine was obtained. However, it is said that the ingredients used to manufacture the margarine entered the company's inter-State trade as soon as they were used in the process. I do not agree with this view. The practical view is, I think, that the goods which moved across the State border were the finished article. (at p298)

10. The transaction initiated by one of these orders and carried out according to its tenor was a sale of the margarine. Compare Lee v. Griffin [1861] EngR 589; (1861) 30 LJQB 252 (121 ER716) . An analogy to the order is locatio conductio operis faciendi in the Civil Law; where in the case of an order to manufacture something out of the manufacturer's own materials, the contract is a sale. Instit. III. 24. 4.: Dig. 19. 22. 1. I think that the nature of the transaction originated by one of these orders if carried out was that the company sold margarine of its own manufacture to the customer sending the order. It was necessary for the company itself to manufacture the margarine to fulfil the order. If strictly the order required the company to manufacture specially the quantity of margarine required, I do not think the terms of the order could make the manufacture part of the company's trade and commerce among the States. It was necessary for the goods to be made before the trade in them began. This is the true relation of the manufacture to such trade. It cannot be correct to say that the manufacture was part of such trade. I think that the manufacture of the goods specially to the order of the company's inter-State customers does not in any way render inapplicable the rationale of Grannall's Case [1955] HCA 6; [1955] HCA 6; ; (1955) 93 CLR 55 . It was established doctrine before the case was decided that manufacture in itself is not within the scope of s. 92 of the Constitution. Latham C.J. said in Matthews v. Chicory Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263 : "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" (1938) 60 CLR, at p 271 . (at p299)

11. In argument it was not conceded on the part of the company that Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 is right. We decided against re-opening that case. Section 22 has not been amended in any way which could affect its constitutional operation since Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 was decided. I would hold on the authority of the case that s. 22A of the present Act is a wholly valid enactment not affected in any way by s. 92 of the Constitution. It follows that s. 22A (1) (d) was binding on the company. Clements and Marshall Pty. Ltd. v. Field Peas Marketing Board (Tas.) [1947] HCA 61; (1947) 76 CLR 401; (1948) 76 CLR 414 was heavily relied upon by counsel for the company. This case was cited by counsel for the company in the argument in Grannall's Case (1). But the case is not mentioned in the judgment. Apparently the judges who decided Grannall's Case [1955] HCA 6; [1955] HCA 6; (1955) 93 CLR 55 did not think that the Field Peas Case [1947] HCA 61; (1947) 76 CLR 401; (1948) 76 CLR 414 helped the company's argument. In my opinion it does not provide any reason for holding that we should not abide by the decision in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 . (at p299)

12. It should be declared that the defendant company is guilty of the offence charged in the information before the Court. (at p300)

13. The information and the statement of admitted facts as supplemented at the hearing of the reference and the documents annexed should be remitted to the Court in its original jurisdiction. The only question to be decided is the question of penalty. (at p300)

KITTO J. In an earlier case in this Court in which the defendant company was concerned, Grannall v. Marrickville Margarine Pty. Ltd. [1955] HCA 6; (1955) 93 CLR 55 , the joint judgment of Dixon C.J., McTiernan and Webb JJ. and myself contained the following passage: "No doubt goods are the subject matter of the freedom to sell and deliver or transport across State borders and if, by reason of legislative restrictions, goods of a given description do not come into existence and are not imported into Australia, there is to that extent no subject matter. It is of course obvious that without goods there can be no inter-State or any other trade in goods. 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. But that does not make manufacture production or importation trade and commerce among the States. It is no reason for extending the freedom which s. 92 confers upon trade and commerce among the States to something which precedes it and is outside the freedom conferred" (1955) 93 CLR, at pp 71, 72 . (at p300)

2. The present case arises out of an attempt by the defendant company so to order its affairs as to make its manufacture of table margarine, over and above the quantity permitted by its licence under the Dairy Industry Act, 1915-1962 (N.S.W.), not an essential preliminary to inter-State trade in that margarine but actually part and parcel of inter-State trade. In the earlier case the Court had made it clear that neither a possibility that a manufactured product may be disposed of in such trade nor even a definite intention on the part of the manufacturer to dispose of it in such trade will make the manufacture anything more than a preliminary to the trade; but the defendant company has pursued a hope which depends upon an assumption that if the possibility be attended with a very high degree of probability, and the intention be sufficiently firm and sufficiently manifested by unequivocal overt acts, the desired result may be achieved. (at p300)

3. The steps that have been taken in the endeavour to incorporate the manufacturing process into the inter-State trade are these. The defendant company has secured orders for specified quantities of margarine from other companies which carry on their businesses in States other than New South Wales, each order requesting the defendant company, whose only margarine factory is in New South Wales, to manufacture in its factory and supply to the ordering company (i.e.in the other State) the specified quantity of margarine in good order and condition. The steps necessary for fulfilling these orders are then carried out quite separately from the corresponding steps that are taken in order to produce margarine for other purposes, and are performed in such a way that it is possible to say of any selected mass of material in the factory, whatever portion of the manufacturing process is in progress or has been completed, whether or not margarine is being produced or has been produced for the purpose of inter-State sale. Moreover when margarine emerges from the final stage of manufacture, that is to say is extruded in bulk form from a machine known as the "A.W. Plant", if it is intended for fulfilment of inter-State orders it is put into a trolley containing only margarine manufactured for that purpose, and bearing a chalk notation on its side specifying the State (not being New South Wales) to which it is intended that the margarine in the trolley shall be delivered. The trolley is put into a refrigerated room on the exterior of which the word "Inter-State" is painted, and which is used only for storing margarine manufactured to fulfil inter-State orders. Subsequently the packaging processes are carried out by the use of packaging machines labelled "Inter-State", through which margarine for other purposes does not pass. The packaging, in foil wraps in blocks of one-half pound or one pound each, conforms in each case with the law of the State for which the margarine has been ordered. Each State other than Tasmania has requirements as to legends and markings and as to shapes of packages differing from those of New South Wales, and the legends and markings and the shapes differ accordingly. The foil-wrapped packages are then packed in twelve-pound cartons and they in turn in forty-eight-pound cartons, the sides of the latter being stamped with the relevant destination outside New South Wales. These cartons are then placed in a special store-room which is used exclusively for storing margarine awaiting despatch to inter-State purchasers, and are kept there until being despatched to their destination outside New South Wales. (at p301)

4. From the mutual admissions of the parties it is clear that, unless margarine manufactured in the manner above-mentioned for the purpose of fulfilling inter-State orders be counted, the defendant company has not contravened the terms of its licence, but that if such margarine be counted the offence charged has been committed. (at p302)

5. There is no doubt that at every stage of the process that is followed with a view to fulfilling a particular inter-State order, from the time when the prime ingredients (essential fats and oils) are first put into the blending tank in which the basic oil blend is achieved to the time when the forty-eight-pound cartons of the manufactured product are actually despatched from the store-room on their inter-State journey, it is possible to say with complete accuracy of the material then and there being dealt with that the defendant company intends to deal with it for the purpose of fulfilling an inter-State order and for no other purpose; and in the light of the practice which the defendant company has been following without deviation there is ample reason for a confident expectation that the material and the ultimate product will in fact be applied to that purpose and no other. (at p302)

6. From the foregoing recital it will be seen that a conclusion that the defendant company has succeeded in its aim of making the manufacture of the relevant margarine a part of inter-State trade cannot be reached consistently with the decision in the earlier case and with the reasons that led to it, unless by reason of one or both of two considerations: first, that the manufacture as well as the supply of the specified quantities of margarine has been expressly stipulated for in the contracts, and, secondly, that a firm intention that the margarine which has been manufactured in excess of the licensed quantity should be applied to the fulfilment of inter-State orders exists throughout the process of its manufacture. As to the first of these considerations it must be remarked at once that in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 the contracts with purchasers in other States, though the express stipulation was only for sale and supply, obviously contemplated the manufacture of the margarine in the defendant's factory, and indeed some of them actually contained an express or implied stipulation for the despatch by the defendant of table margarine of its manufacture from its premises and the delivery thereof by the defendant to the buyers in other States. Yet the manufacture of margarine for the purpose of fulfilling even those contracts was declared by the Court to be merely preliminary to, and not part of, inter-State trade. As to the second of the two considerations now relied upon, it must be recalled that in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 , recognition of the defendant's "intention and purpose to devote and apply a substantial portion of its total output of table margarine to the performance of contracts containing stipulations of the kind mentioned" (1955) 93 CLR, at pp 57, 58 did not prevent the Court from concluding that the inter-State trade that took place was a trade in the product and did not include the activity of production. (at p303)

7. The substance of the argument we have to consider in the present case is that everything the defendant company did in performance of a contract with a buyer in another State constituted one "transaction", and possessed as a whole the character of inter-State trade. The argument protested against the dismemberment of "the transaction" in disregard of what was asserted to be commercial and practical reality. The use thus made of the word "transaction" as a label for the sequence of activities the unity of which it is the object of the argument to demonstrate is question-begging and inaccurate. The question to be decided is whether, on the one hand, the activities are in fact the component parts of one inseverable piece of trade across State lines, or whether, on the other hand, the manufacture is merely the essential method (essential because stipulated for by the contract) by which the manufacturer equips himself with the wherewithal to trade and the trade that takes place across State lines is trade in manufactured goods. The case before us is one in which, as it seems to me, there is the clearest break between the manufacture and the inter-State movement by means of which the manufactured margarine is got to the proper place for delivery to the buyer in fulfilment of the contract, and the break is such that to treat the steps in manufacture and the inter-State movement as one continuous piece of trade is artificial and unreal. It is true that the beginning of the inter-State movement of cartoned margarine is the beginning of an activity which no one could doubt is within the protection of s. 92, but up to the moment when that movement begins there is nothing to connect any specific material with inter-State trade - whether it be material in the course of manufacture into margarine, or fully manufactured margarine, or even wrapped and cartoned margarine - except the firm but inherently changeable intention of the defendant company and its own manifestations of that intention by means of appropriate labelling and the use of plant consistently reserved for use in carrying out intentions of a similar kind. Even where a specific batch of material can be identified in the factory as being in course of manufacture for the specific purpose of being applied to fulfilment of a specific contract with a buyer in another State, it is not logically possible to affirm that any trade in respect of that material or any inter-State movement has begun. An endeavour was made to gloss over this fact by saying that in the circumstances of such a case it is possible to say that the margarine "will" be applied to a contract or contracts for inter-State supply; and, again, that from the beginning of the manufacturing process the material was "devoted to" the fulfilment of those contracts. Statements of this kind are inaccurate; and if they be corrected so that "will" becomes "will in all probability" or "will unless the defendant company changes its mind", and "devoted to" becomes "intended for, and labelled as often and as plainly as is practicable with an indication that it is intended for", the propositions become patently irrelevant. Perhaps a word should be added about the expression "devoted to". It is often used in cases arising under s. 92 to express the idea of having been launched upon a movement which in a practical sense is either an entire movement, or an integral part of a larger movement, leading from a point in one State to a point in another State. But the use which the defendant makes of the expression in the present case is inappropriate to the facts, unless indeed one is to say that an inter-State movement begins with the first bringing of ingredients together as the initial step in the manufacture of goods for the purpose of delivery to a purchaser in another State. In my judgment this is not to be said, because it is simply not true. There can be no objection to saying that the materials when put into the manufacturing process are "devoted" to the production of goods in a fit state for inter-State trade, and that goods when so produced and ready for inter-State trade will become "devoted" to that trade if and when the first step in the despatching of them is taken. But the fact that there is no necessary identity between the goods ultimately produced from those particular materials and the goods which ultimately are sent on a particular inter-State journey would be enough by itself to preclude acceptance of the proposition that those materials have become the subject of a specific operation of inter-State trade as soon as they are put into the course of manufacture and so are from that moment onwards "devoted to" inter-State trade. For my own part, I would take broader ground and say that where the subject-matter of a proposed inter-State movement in trade is manufactured goods the manufacture of the goods is, in the nature of things, no part of inter-State 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 inter-State trade in manufactured goods, and is not itself a part of any inter-State trade. (at p305)

8. I do not think that a contrary view could be maintained without a radical re-writing of the judgments in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 , or that a sufficient re-writing of those judgments, even if the Court were willing to reconsider Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 , could be performed without a re-writing of s. 92 itself. Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 propounded no new doctrine; it placed no new interpretation upon s. 92; it simply declined to go beyond the limits which the very terms of the section prescribe, as had been explained with the utmost care in such earlier cases as Carter v. Potato Marketing Board [1951] HCA 60; (1951) 84 CLR 460 ; Hospital Provident Fund Pty. Ltd. v. State of Victoria [1953] HCA 8; (1953) 87 CLR 1 and Wragg v. State of New South Wales [1953] HCA 34; (1953) 88 CLR 353 . The defendant in the present case sought comfort from the judgments of Williams J. (as the Judge of first instance) and Dixon J. (in the Full Court) in the Field Peas Case [1947] HCA 61; (1947) 76 CLR 401; (1948) 76 CLR 414 . An attempt for this purpose to go behind the later judgments of the Court, in which the particular kind of problem that arises here has been worked over and answered with some precision, must surely be misguided. But I have not in fact discovered anything in the Field Peas Case [1947] HCA 61; (1947) 76 CLR 401; (1948) 76 CLR 414 which affords the defendant any comfort. One passage relied upon was in the judgment of Dixon J.: "We should, for the purpose of s. 92, regard the company's position not from the point of view of the legal character of the right to goods the contracts give or to the geographical point at which delivery in fulfilment of the contracts may be effected. We should consider the commercial significance of transactions and whether they form an integral part of a continuous flow or course of trade, which, apart from theoretical legal possibilities, must commercially involve transfer from one State to another" [1948] HCA 10; (1948) 76 CLR 414, at p 429 . This passage was directed to the question whether the plaintiff in that case should be conceded a locus standi to seek from the Court a declaration that an enactment was invalid for inconsistency with s. 92 and for ancillary relief by way of injunction; but even if read as in a wider context the passage contains nothing to assist the defendant in the present case. Indeed, it illustrates how the word "transaction" should be kept to its proper use; for it insists upon identifying the relevant transactions and then considering whether together they form a course of trade. What is shown by the later cases above cited is that even if one calls manufacture a "transaction", that "transaction" and the transactions of sale and delivery across State lines do not together form a continuous course of trade, but form simply a sequence in which trade begins after manufacture is complete. (at p306)

9. In my opinion the defendant company should be convicted. (at p306)

MENZIES J. The only question for us is whether the changed mode of business adopted by the defendant since the decision of this Court in Grannall v. Marrickville Margarine Pty. Limited [1955] HCA 6; (1955) 93 CLR 55 has put that part of its business which consists in manufacturing margarine in accordance with orders from inter-State customers for delivery in States other than New South Wales outside the scope of the earlier decision. The defendant's case is that, manufacturing as it does to fulfil an obligation to manufacture margarine and to deliver it in another State, it is engaged in inter-State trade which is protected by s. 92 of the Constitution so that the New South Wales law imposing a quota upon the production of margarine can have no application to that manufacturing. (at p306)

2. The mode in which the defendant now carries on its business is set out in detail in the judgment of Owen J., which I have had the advantage of reading, and I shall not recapitulate what has there been said. (at p306)

3. In my judgment, to manufacture margarine in New South Wales against an order from a person in another State for delivery in that other State is not to engage in inter-State trade. There is, of course, much falling within the description of inter-State trade and commerce involved in the defendant's business with its customers in other States but the actual manufacture of margarine for use in that trade is not itself part of inter-State trade. A manufacturer is usually a trader because part of his business is to sell his products but to manufacture is not, of itself, to trade and it is an error to treat all aspects of the business of manufacturing to meet orders as trading. In the penultimate paragraph in the joint judgment in the former case, four members of the Court express in guarded language the conclusion that the New South Wales law here in question included no relevant restriction on trade, commerce and intercourse among the States. The language there used I adopt here, notwithstanding the changes that have been made by the defendant in its manner of doing business. (at p306)

4. In a case such as this, it is not necessary to consider the extent to which the Parliament of the Commonwealth may, under s. 51 (i.) of the Constitution, legislate "with respect to" activities which may be described as "manufacturing for export". This case raises an entirely different problem from that dealt with in O'Sullivan v. Noarlunga Meat Ltd. [1954] HCA 29; (1954) 92 CLR 565 . (at p307)

5. Counsel for the defendant placed great reliance upon what was said by Williams J. and Dixon J. (as he then was) in Clements and Marshall Pty. Ltd. v. Field Peas Marketing Board (Tas.) [1947] HCA 61; (1947) 76 CLR 401 and Field Peas Marketing Board (Tas.) v. Clements and Marshall Pty. Ltd. [1948] HCA 10; (1948) 76 CLR 414 . The contention was that in these judgments there is to be found authority for the proposition that to grow peas in one State for export to another State by a merchant who contracts to buy the peas from the growers is inter-State trade protected by s. 92. Pea growers in Tasmania in the winter and spring of 1946 made contracts with Clements and Marshall Pty. Ltd., a merchant, to deliver peas to be harvested in the autumn of 1947. Before the harvesting of the peas, the merchant made contracts with buyers in other States for the sale and shipment to them of quantities of peas. The growers' contracts were for delivery in Tasmania ; the merchant's contracts reselling the peas which it expected to have delivered to it under the contracts with growers required consignment for inter-State carriage. The Board claimed that, by virtue of a proclamation under the Marketing of Primary Products Act 1945 (Tas.) and the Marketing of Primary Products (Field Peas) Act 1946 (Tas.), the growers' peas became vested in it upon their coming into existence. The Marketing of Primary Products Act provided : "Nothing in this Act and no proclamation or agreement made under this Act with any Government or persons shall in any way interfere with the free operation of s. 92 of the Commonwealth Constitution". The Board's claim was rejected. Dixon J. said : "The field peas legislation enters at the earliest stage upon the control of all trade in the product. As the commodity comes into being the Board takes the fullest command of its disposal that compulsory acquisition and statutory authority can give. But, as the title to the Act says, it is for the marketing of field peas. Acquisition is only a device to secure that end. It is to ensure, so far as may be, that no peas shall escape into the market, but that all that Tasmania produces shall pass through the statutory Board. All sales by growers are domestic, inter-State or overseas. The distribution of the commodity among these three sections of trade is to be the work of the statutory body. As is shown by the conditions prevailing in the season to which at first the Act was limited, the very purpose was to secure that a greater quantity of peas was held for the more profitable overseas market instead of going through what were considered the less profitable channels of free commerce into inter-State trade. There is in my opinion a complete negation of freedom of trade in peas from one State to another. All freedom to market his product is denied to the producer : all trade is taken into statutory control ; the purpose is to provide an exclusive method of disposing of the commodity and to make any form of inter-State and overseas trade in the commodity impossible unless by or with the consent of the Board ; and the primary purpose is to obtain the advantage of overseas markets at the expense of inter-State trade" (1948) 76 CLR, at pp 423, 424 . This, to my mind, falls far short of the contention advanced on behalf of the defendant, for while it is said, very definitely, that freedom to market inter-State goods which have been produced is protected by s. 92, it is not said that s. 92 confers freedom to produce goods to be marketed inter-State. It is this latter freedom which is now claimed. Williams J. did say : "In my opinion a dealer in a State has a similar right under s. 92 to buy goods in that State for sale in another State to the right of the grower or manufacturer of goods in one State to sell them in another State" (1947) 76 CLR, at p 409 but, if this means, as counsel for the defendant claimed it does, that a person intending to sell goods in the course of inter-State trade has a right protected by s. 92 to buy - or to manufacture - goods for the purpose of making such sales, it is an opinion which, as a general proposition, I, with respect, do not share. It would all depend upon the concrete case. (at p308)

6. For the foregoing reasons, I consider that the statement of facts here reveals an offence on the part of the defendant. (at p308)

WINDEYER J. I need not describe the course that the defendant company follows in the hope of escaping from the limitations that the Dairy Industry Act, 1915-1962 (N.S.W.) puts upon the amount of table margarine that it may make. The contention made on its behalf fails I think, not because of any particular thing done or not done in carrying out its scheme. It fails 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 inter-State trade. It is not brought within the concept by the things being ordered by a person in another State. And it is immaterial whether that person be a customer of the manufacturer, whether an individual or a subsidiary company, or someone having no regular business relationship with the manufacturer. (at p309)

2. Of course one can always speak of any activity or series of activities undertaken with a particular end in view as a "transaction" directed to that end. The word can be a convenient one if it is used with conceptual metes and bounds in mind ; but merely using the word does not push out the bounds of an idea. It seems to me that the decision of this case is dictated by what the Court has already said in other cases, especially in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 . If that be not so, I am content to express my complete concurrence in what my brother Kitto has written which I have had the great advantage of reading. The defendant should be convicted of the offence charged. (at p309)

OWEN J. The informant Stanley Thomas Beal laid an information against Marrickville Margarine Pty. Limited (the company) charging it with a breach of s. 22A (1) (d) of the Dairy Industry Act, 1915-1962 in that between certain dates it had manufactured table margarine in contravention of a condition of a table margarine licence held by it which set a limit of 2,166 tons to the quantity of table margarine which might be manufactured by it during the currency of the licence. (at p309)

2. A statement of the facts was agreed upon by the parties and placed before the learned magistrate before whom the information came and thereafter an order was made that the cause be removed into this Court under s. 40 of the Judiciary Act. A further order was later made by McTiernan J. under s. 18 of the Judiciary Act directing that the matter be argued before the Full Court. (at p309)

3. The question raised by the case is whether s. 22A (1) (d) is wholly valid and applies, as on its face it does, to all manufacture of table margarine in New South Wales or whether, by virtue of s. 92 of the Commonwealth Constitution, its operation is either limited to the manufacture of margarine for the purposes of sale within New South Wales or is wholly invalidated. (at p309)

4. Section 22A (1) (b) prohibits the manufacture of table margarine except under license from the Minister of Agriculture and, by sub-s. (3), the Minister is given a discretion to refuse an application for a licence or to grant it subject to such conditions as he thinks fit and specifies in the licence. Every licence must, however, contain a condition specifying the maximum amount of table margarine which may be manufactured by the holder of the licence during its currency (sub-s. (6) (a)) and the total quantity which may be specified in the aggregate for all licences issued for any period of twelve months ending on 30th June is not to exceed nine thousand tons (sub-s. (6) (c)). Section 2 (2) contains a severability clause which follows the usual pattern. (at p310)

5. It appears that at all relevant times the company held a licence to manufacture table margarine which contained a condition specifying 2,166 tons as being the maximum amount that might be manufactured by it during the currency of the licence. In fact during its currency it manufactured an amount in excess of that quantity and a large proportion of its output was applied in the fulfilment of orders received by it from customers in States other than New South Wales. It was for its failure to comply with this condition of its licence that the prosecution was launched. In an earlier case of Grannall v. Marrickville Margarine Pty. Ltd. [1955] HCA 6; (1955) 93 CLR 55 , the company was prosecuted for a breach of s. 22A (1) (b) of the Act in manufacturing table margarine without being the holder of a licence and it was contended on its behalf that the provisions of that paragraph, in so far at least as it purported to prohibit, except under licence, the manufacture of margarine intended to be supplied to buyers in other States, infringed the freedom of inter-State trade, commerce and intercourse which s. 92 guarantees. The evidence in that case showed that a substantial proportion of the company's output was intended by it to be applied and was in fact applied to the fulfilment of contracts between it and buyers in other States which called for the sale and delivery to those buyers of margarine from the company's premises. The contention failed. In their joint judgment Dixon C.J., McTiernan, Webb and Kitto JJ. pointed out (1955) 93 CLR, at p 71 , that the prohibition in s. 22A (1) (b) was directed solely to the process of manufacture and did not restrict the freedom of the company to engage in inter-State trade and commerce. Their Honours agreed, of course, that the manufacture, production or importation of goods was an "essential preliminary condition" to any trade, inter-State or otherwise, in goods since without goods, there could be no trade in them. But that, they considered, did not make the manufacture, production or importation of goods trade and commerce among the States. They went on to say : "Two tendencies have grown manifest of late. One is to press the operation of s. 92 beyond the subject matter of trade, commerce and intercourse among the States so that it denies to the legislature of this country the power to impose any prohibition, restriction or burden if its consequences could be seen in what was done or not done in the course of inter-State commerce. The other is to seek to extend the freedom which s. 92 guarantees to trade, commerce and intercourse among the States to antecedent or subsequent transactions on the plea that they are incidental, ancillary or conducive to inter-State transactions or necessarily consequential upon them. There is in truth nothing to justify such notions which would go far to exclude legislative power the existence of which has never been doubted. The defendant company's argument in the present case would, for example, appear to mean that there could be no effective prohibition of the importation of goods into Australia if they were merchandise intended to be bought and sold in inter-State trade. A customs tariff could not effectively be used to restrict importation if its purpose and operation were to prevent the dutiable goods going into inter-State trade" (1955) 93 CLR, at p 79 . Fullagar J. said: "In order to bring the present case within the protection of s. 92, it was necessary for the defendant to put forward a conception of inter-State trade and commerce which, as my brethren have observed, has been put forward in several recent cases but has never been accepted. The substance of that view seems to be that operations such as production or manufacture are immune from legislative interference so long as it is possible that the producer or manufacturer may dispose of his product in inter-State trade, or at least if he intends to dispose of it in inter-State trade. I agree with what the Chief Justice and McTiernan, Webb and Kitto JJ. have said on this subject. There is no decision which gives any countenance to such a view. Section 92 protects only activities which themselves possess the character of inter-State trade, commerce, or intercourse" (1955) 93 CLR, at p 82 . In the present case, counsel for the company submitted that Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 was wrongly decided and should be overruled. In my opinion that submission should be rejected. The passages I have quoted from the judgments set out propositions with which I entirely agree and we have recently applied them to a case in which it was unsuccessfully argued that the prohibition under the Customs Act of the importation of aircraft intended to be used for the carriage of goods inter-State was an infringement of s. 92: Reg. v. Anderson; Ex parte Ipec-Air Pty. Ltd. [1965] HCA 27; (1965) 113 CLR 177 . Counsel's principal submission was, however, that the facts in the present case differ in vital respects from those in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 . They certainly differ in some respects and whether they lead to a different conclusion is the real question to be decided. (at p311)

6. It appears that at some stage after the decision in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 , the company adopted new procedures in manufacturing margarine for sale and delivery by it to customers in other States. No doubt it did so in an endeavour to give an inter-State character to so much of its manufacturing activities as was devoted to the production of margarine to fill inter-State orders and thus gain for those activities the protection of s. 92. No criticism can be made of it for doing that. The procedure adopted may, I think, fairly be summarized in the following way. Every order from a would-be purchaser in a State other than New South Wales took the form of a request to the company to manufacture in its factory and deliver to the buyer's premises the quantity of margarine specified in the order. Having received such an order the company proceeded to manufacture margarine to fulfil it, pains being taken by it to ensure that the process of manufacturing margarine to fill inter-State orders was kept separate and apart from the process of manufacturing margarine to fill intra-State orders or to build up stocks. Thus it became possible, at all stages of the manufacture, to identify a particular batch of ingredients as being those which, when processed, would produce the finished article which would be delivered to the buyer or buyers in States other than New South Wales. Under the earlier system which was in operation when Grannall's Case [1955] HCA 6; [1955] HCA 6; (1955) 93 CLR 55 was decided, this could not be done. It was not until the process of manufacture was completed and a quantity of the product appropriated to a particular order to know whether that particular batch of margarine would enter the flow of inter-State trade. (at p312)

7. For the company it was contended that, having regard to the methods which it has adopted of keeping its manufacture of margarine for inter-State sales and deliveries separate and distinct from its manufacture of the product for sale and delivery in New South Wales, it is entitled to claim the protection of s. 92 from the moment when the raw materials, which will ultimately be turned into margarine for sale and delivery across the State boundary, are set aside or allocated for the purpose of processing them into the finished product which is to be used to fulfil an inter-State order until that product is delivered to the customer. There is, it was said, but one entire transaction the whole of which bears the character of inter-State trade and commerce and throughout that whole transaction the company is entitled to the protection of s. 92. I am unable to agree. If one asks what was the inter-State trade in which the company was engaged at the relevant time, the answer would surely be that it was that of selling and delivering margarine. 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 inter-State buyer is a necessary preliminary to its ability to trade inter-State 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 inter-State trade, commerce or intercourse. It is an inter-State trader in margarine, not an inter-State trader in the ingredients which go to make up the finished product or an inter-State trader in the manufacturing processes by which it is produced. In my opinion, the distinction which exists between the facts in the present case and those in Grannall's Case [1955] HCA 6; (1955) 93 CLR 55 does not have the effect of bringing under the shelter of s. 92 the company's manufacturing activities entered upon for the purpose of fulfilling orders received from customers in States other than New South Wales. It follows that the company has committed the offence charged against it and the case should be remitted to McTiernan J. in order that his Honour may determine what penalty should be imposed. (at p313)

ORDER

Costs of the proceedings in this Court to be paid by the defendant.

Cause remitted to the Central Court of Petty Sessions, Sydney, for the purpose of that Court imposing such penalty as it thinks fit; and for the purpose of its making such order, if any, as it thinks fit as to the costs of the proceedings before it.