G G Crespin & Son v Colac Co-operative Farmers Ltd [1916] HCA 13; (1916) 21 CLR 205 (24 March 1916)

G. G. Crespin & Son Plaintiffs, Appellants; and The Colac Co-operative Farmers Limited Defendants, Respondents.

The plaintiffs (appellants), by a contract dated 29th May 1914, agreed to sell to the defendants (respondents) 80 bales of Delta potato gunny bags shipped at Calcutta at 6s. 10d. per dozen delivered. The terms of payment were "net cash against rail receipts," and delivery was to be made of 40 bales in the December and 40 in the January following. Delivery was to be in Melbourne. At the date of the contract, gunny bags were free from Customs duty, but on 3rd December 1914 a duty of 10 per cent. ad valorem was imposed upon them. Plaintiffs in fact delivered in part performance of the agreement 65 bales which had been entered for home consumption before that date, but in respect of the other 15 bales, which had not then been so entered, they had to pay duty. The action was brought to recover the amount so paid. The claim is made by virtue of the provisions of sec. 152 of the Customs Acts 1901-1910, which provides that:

In the present case the contract was for the sale of goods of external origin, and it is not disputed that it was for the sale of goods duty paid, but the respondents contend that sec. 152 only applies to contracts for the sale of specific goods. I confess my inability to appreciate the arguments on which this contention is founded. The terms of the section are plain and unambiguous. It applies, of course, only to goods in respect of which duty is payable, that is to say, goods of external origin. But its terms are general: "any agreement for the sale or delivery of goods duty paid." The section becomes operative upon the happening of the event specified, i.e., an alteration in the duty collected affecting such goods before they are entered for home consumption, which, of course, means an alteration in the tariff affecting goods of that class. When this event happens the agreement is to be altered in the manner specified, that is to say, it is to be read from that date, if not ab initio, as containing a stipulation that the seller may add the increased duty to the price. In this there is no ambiguity. The new agreement only comes into operation "after payment of the new or increased duty," that is, in cases in which the seller has for the purpose of performing the contract entered goods for home consumption. If, by the express or implied terms of the contract, the seller was not at liberty to perform it by the delivery of goods which had not then already been entered for home consumption, the section would have no application. It is not suggested that the agreement in the present case contained any such stipulation.

The defendants also contend that sec. 152 is ultra vires of the Commonwealth Parliament. The answer to the argument may be put very briefly. Amongst the powers of legislation conferred upon the Parliament by sec. 51 is a power to make laws with respect to taxation (sec. 51, pl. II.). Now, laws with respect to taxation necessarily include many provisions besides the imposition of taxes, and all such provisions as are reasonably incidental to the exercise of the power of taxation are, irrespective of the express provisions of sec. 51, pl. XXXIX., authorized by the express grant. It is obvious that one effect of the imposition of new taxation through the Customs (which, in practice, takes effect immediately on its being proposed in Parliament) may be to work a great hardship, and even injustice, in the case of agreements which have been already made for the sale or delivery of goods of external origin if the seller is saddled with the burden of the added taxation. It would be a very lame and impotent Legislature that, being entrusted with the power of imposing Customs taxation, could not make provision to avoid such injustice. I have, therefore, no difficulty in holding that sec. 152 is within the power to make laws with respect to taxation.

If there were room for any doubt on the matter, it is removed by the historical fact that similar provisions have for a long period been regarded by British Legislatures as fit to be added to laws imposing Customs and excise duties. The earliest Act of the United Kingdom to which we were referred was the Customs Tariff Act 1855 (18 & 19 Vict. c. 97). That Act contains (sec. 9) an enactment similar to sec. 152 now under consideration, which has been re-enacted in the United Kingdom from time to time ever since. Before the establishment of the Commonwealth similar provisions had been enacted in Queensland (1874), and in South Australia and New South Wales, in each case in an Act dealing with Customs taxation. It is therefore clear that when the Constitution of the Commonwealth was framed such provisions were regarded as laws relating to taxation, and a power to make laws "with respect to taxation" would, as a mere matter of interpretation, have been understood to include such a matter.

For these reasons I am of opinion that the appellants were entitled to judgment in the action, and that the appeal should be allowed.

Of the 80 bales of Delta potato gunnies mentioned in the agreement of 29th May 1914, 65 bales were delivered without claim of duty, as they had been entered for home consumption before the imposition of the duty. As to the remaining 15 bales, in respect of which the plaintiffs claim against the defendants an increase upon the contract price of £13 2s. 9d., that amount represents 10 per cent. duty ad valorem.

This class of goods having been free theretofore, the duty in question was imposed on 3rd December 1914. The duty on the 15 bales was paid upon entry for home consumption on 27th January 1915.

Thus it appears that the alteration in duty, though, of course, made after the agreement, took place before the goods were entered for home consumption.

I am of opinion that the terms of the contract applied to the facts bring the case within sec. 152 of the Customs Act. "Shipped" means "to be shipped," in view of the dates. That section is absolutely clear in its terms. It is contended that it applies only to specific goods, or to goods appropriated to the seller with his consent before entry for home consumption. I regard this interpretation as conjectural. It certainly is not warranted by the terms of the section, and it is supported only by argument as to consequences which may in certain cases constitute hardship to buyers. It may be, though I certainly do not say so, that the Legislature ought to have confined the section in its application to cases such as the respondents describe, but that is not a question which affects the construction of the section.

As to the contention that the provision is beyond the power of Parliament, it does not appear to be well founded. It is urged that it relates to a subject exclusively within the competence of the State Legislatures. It would be a strange and incongruous thing that a Parliament having power to impose a Customs duty should be so restricted in the exercise of that power as to be unable to alleviate a manifest hardship in the incidents of the duty, and that any such hardship must continue until the Legislature in which the port of entry is located should choose, if it ever chose, to relieve against the hardship. But that is clearly not the position.

By the Constitution, sec. 51 (II.) the Federal Parliament has power to make laws "with respect to" taxation. Authority to make laws "with respect to" any subject extends to matters incidental to such laws. That is, of necessity, included in the power granted. There is also by sec. 51 (XXXIX.) a power to make laws with respect to "matters incidental to the execution of any power vested ... in the Parliament." Though the incidental power would have been exercisable without this express grant, the sub-section makes assurance doubly sure. Sec. 55 of the Constitution does not apply in either branch of it. The Customs Act is not a "law imposing taxation," though it is read with the Tariff Act for purposes of construction. It is, of course, a law "with respect to" taxation, but that does not of itself bring it within the section.

Now, it seems to me that a provision such as sec. 152 finds its proper place in a Federal Customs Act. The making of provision for the alleviation or removal of that which would otherwise, in the execution of a contract for sale, made before the imposition of a new or increased duty, but to be performed at a date which happens after the intervention of the duty, is an adjustment of a kind necessary for securing the equitable operation of the law. It is true that it affects certain contracts, and that legislation upon contracts is ordinarily the province of the State and not of the Federation. But this is a case of the adjustment of obligations which necessarily are affected fairly or unfairly, but directly, by the federal law, and it is impossible to say that in such a case as this the endeavour to prevent the unfair effect is not within the competence of the makers of that law.

The provision questioned has long been usual in Customs Acts. It finds a place for many years in English Customs Acts, such as those of 18 & 19 Vict. and 39 & 40 Vict. It appears too as the 10th section of the Finance Act 1901 (1 Edw. VII. c. 7); and the Queensland Customs Duties Act of 1874, the South Australian Customs Amendment Act of 1894, and the New South Wales Customs Duties Act of 1895, all have similar provisions. So that before the Federal Constitution was passed it may fairly be said that such a provision had been long recognized as incidental to Customs legislation.

I do not however, base my opinion on these enactments. It rests on the reason of the thing.

I am of opinion that the learned Chief Justice of Victoria was right, and that the appeal should be allowed, and the plaintiffs should have judgment.

Sec. 152 is part of an enactment which was passed on 3rd October 1901 and, under sec. 2 of the Act, was proclaimed to commence the next day. The section has reference to Commonwealth duties only, and as on 8th October 1901 Commonwealth Customs duties were first imposed (see sec. 4 of Act No. 14 of 1902) it applies and is confined to agreements thereafter made. Sec. 152 is general, and is a statutory provision which runs with, and is to be read into, every agreement for the sale and delivery of goods "duty paid." The expression "duty paid" implies, in my opinion, that the goods, the subject matter of the contract, are goods of foreign origin which, by the contemplation of the parties to be deduced from the contract, have not yet been entered at the Customs for home consumption, and that by the terms or effect of the contract the vendor is to pay and bear the duty, if any, in respect of them.

This section, consequently, includes both goods to be imported and goods already imported but still in bond.

But, in my opinion, unless by the terms of the contract it appears either expressly or by implication that the parties had in contemplation foreign goods not yet entered for home consumption, the section has no application. In other words, it is not sufficient, as I read the section, to say merely that the goods satisfied the contract, that they were entered for home consumption after its date, and that the duty was altered. The nature of the agreement itself is a sine quâ non of the application of the section. Otherwise many contracts made on a purely local basis would be unexpectedly affected.

The contract in this case was made in May 1914, and relates to Indian gunny bags described (inter alia) as "shipped at Calcutta," and deliverable in two instalments, half in December 1914 and half in January 1915. Having regard to the well known nature of the goods and the dates of contract and future delivery, the expression "shipped at Calcutta" indicates, at all events primâ facie, the contemplation of the parties that the goods are not yet in Australia. There is nothing to displace that primâ facie conclusion. The price is 6s. 10d. per dozen "delivered." The contract is therefore within the ambit of the section.

I do not agree with the argument that the section is limited to specific, or rather, identified goods, goods which by appropriation pass to the purchaser before entry for home consumption. "Goods" is defined by sec. 4 as including "all kinds of movable personal property." The term "such goods" in the section means, in my opinion, any goods that are agreed to be sold or delivered "duty paid," as I have explained that term.

The goods claimed for were, after the date of the contract, imported; before they were entered for home consumption, there took place an alteration of duty "affecting" the goods, because it included all goods of that kind, the altered duty was paid by the vendor, and so the section took effect. That is, since there is no express written provision to the contrary, the agreement is "altered." The expression "the agreement shall be altered" means simply that the stipulations of the agreement are to be modified according to the event, as settled by the self-executing provisions set out in the section, which are taken as introduced into or appended to the agreement itself by force of law, standing there as from the beginning, and providing for the event if and when it should happen.

The appellants are therefore clearly entitled to succeed if the enactment is valid. The particular amount claimed is itself unimportant; the construction of the Act is highly important to the mercantile community, but that is capable of alteration if the power to legislate exists. It is the question of the legislative power of the Commonwealth to enact such a law at all, and, if at all, in the form in which it has been enacted, that is the most crucial problem we have to consider.

On these points Madden C.J. held in favour of validity; Hood J. thought the enactment invalid on both grounds; Cussen J. thought it invalid on the first unless it applied only to specific goods, and gave no opinion on the second. In my opinion Madden C.J. was right.

Dealing first with the question of form. Sec. 55 of the Constitution, by its first branch, declares:—"Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect." This is said to be contravened by the presence of sec. 152. But unless the Customs Act 1901 is a "law imposing taxation" that provision has no application. The Act imposing the taxation is not that Act (which is a Customs Regulation Act) but the Customs Tariff Act. The object and effect of the first branch of sec. 55 can be seen by reference to sec. 53. To hold that the Customs Regulation Act was a law imposing taxation would deny the power of the Senate to originate or amend it. It would do more: it would, for instance, eliminate the punitive provisions which clearly do not deal with the "imposition" but with the enforcement of other incidental provisions framed to secure the collection of the tax imposed.

The only real question is whether such an enactment as sec. 152 is incidental to the execution of the power of taxation. The Privy Council asks (Colonial Sugar Co.'s Case[1]) is such a provision one of the "incidents" in the exercise of the power. Whether a given power is incidental to a main power cannot be predicated in all cases without reference to both the inherent nature of the main power and to the circumstances upon which it operates. I refer to some observations of my own in Jumbunna Coal Mine, No Liability v. Victorian Coal Miners' Association[2], and need not repeat them. See also the reasons for not holding certain Canadian legislative provisions incidental in the then existing circumstances: City of Montreal v. Montreal Street Railway[3].

But the concept of "taxation" is not rigid or invariable. It takes various forms according to its object. It is sufficient for present purposes to say that it divides itself into two great classes—(1) direct and (2) indirect; and the recognition of this fact, and of the reason for it, affords the answer to the problem we are dealing with.

The frame of the Canadian Constitution has rendered it necessary to consider with precision the distinction between these two great branches, and the Judicial Committee has settled their respective indicia as a matter of common understanding.

They adopted in two cases the definition of John Stuart Mill in these terms:—"A direct tax is one which is demanded from the very persons who it is intended or desired should pay it. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another; such are the Excise or Customs." The two cases referred to are Bank of Toronto v. Lambe[4] and Cotton v. The King[5].

It is plain that in the case of a direct tax the end of the Legislature is achieved by imposing it on the person intended to pay it, and by incidental provisions securing not only payment by him but also that it is he who shall pay it in reality.

But in the case of indirect taxation, which imports by the above definition the Legislature's expectation and intention that the person immediately paying shall indemnify himself at the expense of another, the legislative intention is not necessarily achieved by leaving the matter unprovided for; it may be frustrated without such a provision.

Inherently, therefore, this main power, so far as relates to the branch of indirect taxation, may have as an incident to its effective legislative exercise the subsidiary power of providing for the indemnity connoted by the nature of an indirect tax.

A priori, therefore, upon the common understanding of what is meant by imposing a Customs and Excise duty, the power of enabling a vendor to add such an increased duty would exist.

Nor is there any fundamental distinction in theory to be drawn between the case of adding an increase of duty and deducting a decrease. What the Legislature has done, it may undo; and if its intention is effected by adding a duty to what would be the price without the duty on the supposition that the lower duty would continue, it can equally correct the error, as it turns out to be, by providing for the case on its true basis of lower duty when the supposition of a higher duty is falsified.

This à priori reasoning is supported by legislative practice, which, for a very long period, has adopted it. During the argument various Australian Acts of Parliament were referred to by Mr. Mann as containing relevant provisions in Customs Tariff Acts or Customs Regulation Acts—as the Queensland Act of 1874 (37 Vict. No. 8, sec. 6), which provided for adding increased duties; the South Australian Act of 1894 (No. 595), which provided for adding increased duties; and the New South Wales Act of 1895 (No. 18, sec. 6), providing for decreases of duty.

Also the English Customs Consolidation Act of 1876 (39 & 40 Vict. c. 36), sec. 20, was mentioned. These were all before our Constitution Act. Since that Act was passed, other English provisions have been enacted, Finance Act 1901 (1 Edw. VII. c. 7), sec. 10, applying as does the Commonwealth Act to new duties as well as to increased duties—the English Act of 1876 not referring to new duties. The Finance Act is only confirmation of the view that such a provision was considered as incidental to "Customs and Excise" at the time the Constitution Act was passed, because it was enacted so shortly afterwards, and the tenth section is under Part I. headed "Customs and Excise."

Since the argument Mr. Starke referred us to the Imperial Customs Tariff Acts Amendment and Consolidation Act of 1855, sec. 9 of which provided for increases and decreases of duty.

I would add other instances I have found. Taking Australia first, I find that the Tasmanian Customs Duties Act of 1894 (58 Vict. No. 4) contained sec. 28 which copied sec. 20 of the English Act of 1876. So that in four States of the Commonwealth legislation of the character now challenged was before 1900 considered by the Parliaments as incidental to the subject of Customs taxation.

So far we have precedent dating from 1855. I have found some earlier instances at random, and I have no doubt there were others before the first I quote, and between that and the rest.

The earliest I refer to is an Imperial Customs Act imposing duties on foreign wines and dated 1796 (36 Geo. III. c. 123). By sec. 9 it is enacted:—"And whereas contracts may have been made for the sale of wine before the same shall have been charged with the duties by this Act imposed; be it therefore enacted, That in all cases where any wine, wherein the respective duties by this Act imposed shall be charged, shall have been after the said 17th April 1796 or shall be delivered in pursuance of such contracts or sales, it shall be lawful for the dealer or dealers in such foreign wine, delivering the same to charge so much money as shall be equivalent to the duties of this Act imposed in respect thereof, in addition to the price of such wine and by virtue of this Act to demand and be paid the same accordingly." That is the type.

The next I refer to is a Customs and Excise Act of 1803 (43 Geo. III. c. 92), by sec. 34 of which additional duties on malt were allowed to be added. A third Act of the kind is one of 1805, a Customs Act (45 Geo. III. c. 29, sec. 18). Another Act is in 1810 (50 Geo. III. c. 77), an Act for imposing additional duties of Customs on wood; sec. 9 of that Act provides for the addition of the duties to contract price, and is, similarly to the preceding enactment, interesting with respect to the argument of limiting sec. 152 to specific goods. An Act of 1816 (56 Geo. III. c. 44), is an Excise Duties Act, and sec. 3 of that Act is on the same lines as sec. 9 of the Act of 1810. There is also the Excise Act of 1854, of which sec. 7 is the relevant section, and I would draw attention to its preamble; then follows the Act of 1855 referred to by Mr. Starke.

There has appeared for over 100 years, at least, prior to our Constitution so consistent and so strong a general practical recognition of the theory which I have referred to, that such legislation is to be regarded as incidental to Customs and Excise and properly classed with the Statutes dealing with those subjects, that in my opinion it is not seriously open to doubt that it passes as, and is, an incidental power resident in the Commonwealth Parliament in connection with Customs and Excise taxation.

The view thus presented is emphasized by sec. 90 of the Constitution, which makes the Commonwealth taxing power in respect of Customs and Excise exclusive. That at least indicates that nothing which has been hitherto regarded as incidental to taxation of that nature is denied to the Commonwealth.

I hold the section is valid, and, for all the reasons I have stated, I agree that the appeal should be allowed.

The first question is as to the meaning of sec. 152 of the Customs Act 1901-1910. I can see no reason for limiting the application of the section to agreements for specific goods. The words are "any agreement for the sale or delivery of goods duty paid"; and these words in their ordinary meaning would apply to the case of executory agreements for the sale or delivery of goods of a certain character, cases where (as here—it is so admitted) the vendor has the right to say which of his goods of the character described, he will appropriate to the fulfilment of his contract (see Benjamin on Sales, 3rd ed., 295, 303). Then, though the section prescribes that the goods must be "duty paid," it is not necessary that the contract should expressly provide for payment of duty by the vendor; it is enough that this condition should be implied by contract; and here it is to be implied from the words "net cash against rail receipts." It is obvious that the goods could not be brought to the railway for transmission until the vendor has cleared the Customs—has entered them for home consumption.

It is quite true that cases of hardship or anomaly may be suggested as a consequence of this contruction—as, indeed, they may be suggested as a consequence of the opposite construction. As counsel for the respondents said, a contract may be made on 1st July for delivery on 1st October; on 1st August a duty may be imposed; and the purchaser may not know between August and October whether he is to get goods on which duty has been paid, or goods which have been cleared before 1st August on which no duty has been paid. This position may be very awkward for merchants who buy to sell again. But the obvious answer is, caveat emptor; the purchaser might have made "express written provision" which would prevent the alteration of the contract by the addition of the duty.

If it is necessary to express one's views on the much debated point, as to the moment when the contract becomes altered by the section, I should say that at present it seems to me to be the moment when the goods, duty paid or not, are appropriated to the purchaser. I do not agree with the argument that the alteration must take place before the entry for home consumption, before duty has been paid.

The second question is, is such a section as sec. 152 within the legislative powers—any of the powers—of the Commonwealth. Sec. 152 does not tax. As Hood J. said, "such legislation is not taxation ... The government revenue is no longer concerned." But the matter does not end there. The power of the Commonwealth Parliament is not merely to tax, or "to levy and collect taxes" &c. (as in the Constitution of the United States) but "to make laws for the peace, order, and good government of the Commonwealth with respect to ... taxation." I have called attention to the force and significance of these words in Attorney-General for New South Wales v. Brewery Employees Union of New South Wales[6] and in R. v. Kidman[7]. If in imposing a tax Parliament think that the tax will cause injustice as between parties to a contract unless the burden be transferred or shared, a law for transferring or sharing the burden of the tax would, in my opinion, be a law with respect to taxation. Or if, in the case of a land tax, Parliament taxed the landowner, but feared that he would transfer the burden to his tenant, Parliament could, I think, provide that any agreement for so transferring the burden should be void. It is the duty of Parliament not only to get money by taxation for necessary purposes, but to get it with a minimum of injustice and inconvenience to the taxpayer; it has to aim at "peace, order, and good government" in the exercise of all its legislative powers; and it is for Parliament to determine what conduces to that end, in legislating on the subject committed to it.

I do not think that it is necessary for the Crown to rely on sec. 51 (XXXIX.). If not fettered by authority, I should think that pl. XXXIX. would cover this case; but since the decision of the Judical Committee in the Colonial Sugar Co.'s Case[8] I do not feel confident as to the effect of that placitum.

Of course, the fact that a provision similar to sec. 152 is found in Customs Acts of Great Britain and of several of the colonies before federation does not conclusively show that it comes within the power "to make laws with respect to taxation" conferred by the Constitution; but it shows, at the least, that sec. 152 is not a subject alien to the subject of Customs, that it is not a novel and violent annexure to that subject, that it is not an unheard of and impertinent intruder. It shows that these Legislatures thought that they should not legislate for Customs without legislating to prevent the injustice which the Customs duties might involve as between parties to bargains. I have, for the purposes of this case, assumed (without deciding) that the respondents are right in reading the words in the contract "shipped at Calcutta" as words of description—not as if they were "to be shipped at Calcutta." I am also treating the words "duty collected" in sec. 152 as meaning "duty colligible and being collected." I prefer to leave the question open as to the provisions of sec. 152 being warranted by the trade and commerce power (sec. 51 (I.)). It is not well to form or to express views on a constitutional question until a case arises in which an answer to the question becomes absolutely necessary.

We have not been asked to consider the effect of sec. 55 of the Constitution; as counsel for the respondents does not urge that the Customs Act 1901-1910 is a "law imposing taxation." On this subject, I may be allowed to refer to my remarks in Osborne v. The Commonwealth[9] and Kidman's Case[10], with this qualification, that owing to the differences between Customs taxation and direct taxation I should not, without more consideration, treat a Customs Tariff Act as not being, in itself, a "law imposing taxation."

The contract in this case, having regard to the nature of the goods and the dates and terms of delivery, is, in my opinion, one for the sale of gunnies to be shipped at Calcutta after the date of the contract. Thus construed, the contract is within sec. 152 of the Customs Act.

This section falls within the ambit of sec. 51 (II.) of the Constitution. Although incidentally sec. 152 affects contractual obligations, in substance it deals with taxation by determining its incidence. Such a power is included in the express authority to make laws for the peace, order, and good government of the Commonwealth with respect to taxation.

Appeal allowed. Order appealed from discharged. Appeal to Supreme Court allowed with costs. Judgment for plaintiffs for the amount claimed with costs.

[1] (1914) A.C., 237, at p. 256; [1913] UKPCHCA 4; 17 C.L.R., 644, at p. 655.

[2] 6 C.L.R., 309, at pp. 376, 377.

[3] (1912) A.C., 333, at pp. 344, 345.

[4] 12 App. Cas., 575.

[5] (1914) A.C., 176.

[6] [1908] HCA 94; 6 C.L.R., 469, at p. 610.

[7] [1915] HCA 58; 20 C.L.R., 425.

[8] [1913] UKPCHCA 4; (1914) A.C., 237; 17 C.L.R., 644.

[9] [1911] HCA 19; 12 C.L.R., 321.

[10] [1915] HCA 58; 20 C.L.R., 425.

High Court of Australia

G G Crespin & Son v Colac Co-operative Farmers Ltd [1916] HCA 13; (1916) 21 CLR 205 (24 March 1916)

HIGH COURT OF AUSTRALIA