Commonwealth v Australian Commonwealth Shipping Board [1926] HCA 39; (1926) 39 CLR 1 (1 November 1926)

The Commonwealth and the Attorney-General for the Commonwealth (On the Relation of Edwards) Plaintiffs; against The Australian Commonwealth Shipping Board and Another Defendants

Flannery K.C. (with him Weston), for the defendant the Australian Commonwealth Shipping Board.

Brissenden K.C. (with him Cassidy), for the defendant the Municipal Council of Sydney.

The Court is of opinion that the demurrers should be overruled with costs. The reasons will be given later.

This is an action by the Commonwealth and by the Attorney-General of the Commonwealth, on the relation of a private individual, for a declaration that the Australian Commonwealth Shipping Board, incorporated under the Commonwealth Shipping Act 1923, transgressed its powers in entering into an agreement with the Municipal Council of Sydney for the supply, delivery and erection at Botany Bay, New South Wales, of six steam turbo-alternators, and an order that the Board be restrained from further proceeding with the agreement.

The statement of claim set out this agreement in some detail, but substantially to the effect already stated. The Board and the Council both pleaded and demurred to this statement of claim, but it is only with the demurrers that the Court is now concerned. The right of the plaintiffs to sue was challenged; but if a public body transgresses its statutory powers the Attorney-General on behalf of the public, whether private injury has been alleged or not, has the right to complain and to obtain a declaration to that effect and if necessary an injunction. If the body transgressing its powers be one incorporated under the laws of the Commonwealth, then the Attorney-General of the Commonwealth is a proper party to complain of that transgression with or without a relator as he thinks expedient.

The real ground of the demurrer depends upon the construction of the Commonwealth Shipping Act 1923. The argument was put in the form of a dilemma: it was said that the Act did not authorize the particular agreement that was entered into or, if it did, then the Act was beyond the power of the Parliament of the Commonwealth to enact, and therefore invalid.

Prior to the passing of the Act the Commonwealth was possessed of a number of ships and occupied two Islands known as Cockatoo and Schnapper Islands in Port Jackson. The Act transferred the ships to the Board and also the interest of the Commonwealth in the islands and all improvements, buildings, structures, erections, dockyards, machinery, &c., on those Islands respectively. It authorized the Board to carry on the general business of a shipowner, and also to carry on in respect of the Islands the business of manufacturer, engineer, dock-owner, ship-builder and repairer and any other business incidental thereto or to the works and establishments. It is unnecessary to consider what power, if any, the Commonwealth has to establish and carry on a line of steamers for commercial purposes, for this case depends upon the authority to carry on in respect of the islands the businesses already specified.

One construction of the section presented to us was that the power conferred by it is limited to acts connected with the shipping line established by the Act or with activities carried on by the Commonwealth under some legislative sanction such as Naval Defence Acts, Post Office Acts and so forth. If this be the proper construction of the section, then the contract entered into in this case is clearly beyond the power, for it stipulates for the supply and delivery to and erection of turbo-alternators for the municipal authority of Sydney for its power-house at Botany in New South Wales. The supply and delivery of these alternators is wholly unconnected with the shipping line or any activity carried on by the Commonwealth under legislative sanction.

Another construction of the section was that it authorized the Shipping Board to carry on upon the islands the business of a manufacturer, engineer, &c., and to supply any person anywhere with commodities and services ordinarily supplied in the classes of business specified in the section; but that construction at once raises the constitutional power of the Parliament to confer any such power.

The Parliament has only such power as is expressly or by necessary implication vested in it by the Constitution. There is no power which enables the Parliament or the Executive Government to set up manufacturing or engineering businesses for general commercial purposes. The trade and commerce power was referred to, but that is a power to regulate trade and commerce with other countries and among the States. The naval and defence power coupled with the incidental power conferred by sec. 51 (XXXIX.) was also relied upon. Extensive as is that power, still it does not authorize the establishment of businesses for the purpose of trade and wholly unconnected with any purpose of naval or military defence. It was suggested, however, that the dockyard and workshops on Cockatoo Island were required for the purposes of the naval defence of the Commonwealth, and that it was impracticable to maintain them efficiently for that purpose unless the managing body—the Shipping Board—was authorized to enter upon general manufacturing and engineering activities, because the cost of maintenance of the works would be excessive and the working staff would be unable to obtain proper experience. Despite the practical difficulties facing the Commonwealth in the maintenance of its dockyard and works, the power of naval and military defence does not warrant these activities in the ordinary conditions of peace, whatever be the position in time of war or in conditions arising out of or connected with war (cf. Fort Frances Pulp and Power Co. v. Manitoba Free Press Co.[1]).

The executive power of the Commonwealth was also touched upon; but it is impossible to say that an activity unwarranted in express terms by the Constitution is nevertheless vested in the Executive, and can therefore be conferred as an executive function upon such a body as the Shipping Board.

I have now to state my reasons for holding that the demurrers should be overruled. The question of law is shortly this: Was the agreement referred to in par. 10 of the statement of claim ultra vires of the defendant Board? The Board has no powers other than those conferred by the Commonwealth Shipping Act 1923 (No. 3 of 1923). Whether the powers so conferred include the capacity to enter into the agreement depends upon the nature of the agreement and the construction of the statute. I say "construction" of the statute, because no one has questioned the validity of the statute apart from the extended meaning sought by the defendants to be placed upon sub-sec. 4 of sec. 14.

The agreement is one by which the Board undertakes to supply to the defendant the Sydney Corporation, for a total price of about £666,600, six turbo-alternators, of which 55 per cent of working parts should be made somewhere in Australia and the residue imported. The agreement contemplated the Board's liability in damages for breach of agreement. The effect of the statute referred to is to establish a shipping line, to provide for its ownership and management by a Board, as a body corporate, to confer on the Board power to carry on the business of a shipowner and any business incidental thereto, to acquire "any land," &c., for the purposes of the "business of the Board"—that is, any land, anywhere at least in Australia—to dispose of any property subject to the Treasurer's consent, to establish offices and local boards and to appoint agents anywhere, and generally to do all things incidental. It has power to appoint officers and servants for "its business." Its fleet was constituted by the transfer of about fifty ships, together with four others when completed. One special matter was also provided for. The Commonwealth had what it called "the right, title and interest of the Commonwealth in and to ... Cockatoo Island and Schnapper Island," where were situated certain structures, works and establishments connected with ship-building and repairing, and that "right, title and interest" was transferred to the Board. The nature of the Commonwealth's right, title and interest may be seen by reference to the Act No. 19 of 1925. Obviously, the full powers of acquisition and disposal given generally by sec. 10, could not be included in the "right, title and interest" conferred by the governing and limiting words of sec. 14. So far as those Islands are concerned, the powers contained in sub-sec. 4 of sec. 14 are necessarily not larger than the "right, title and interest" referred to, which cover some property, but some only. They may even not be so large, and in my opinion the powers in that sub-section are limited to the purposes of the "Line." That, of course, would not prevent the use by the Commonwealth of the works and establishments for its own naval purposes. Parliament could always authorize that by an appropriation or otherwise. But the Board is, in my opinion, constituted, so far as this Act is concerned, for the "Line" purposes only, and the powers expressed in sub-sec. 4 of sec. 14 are ancillary to that purpose. The "business" authorized is not the business which a private "manufacturer" or "engineer," &c., would or might carry on; but it is the business of "manufacturer" only or "engineer" only, &c., that is, the work done by a "manufacturer" or an "engineer," &c. And it is not such work done in respect of anything, or for anyone and anywhere. The manufacturing does not extend, for instance, to agricultural machines or children's toys, nor does the engineering extend to building railway engines for Russia. But, if not, it is because the context supplies the limitation. And the context to my mind is clear.

There is one head office called the "Head Office of the Line" (sec. 5). The Board is to be "for the purposes of this Act" (sec. 6). It is called the "Australian Commonwealth Shipping Board" (sec. 7). The remuneration of the directors is undivided. It has power to appoint officers and servants for "its business" (sec. 11). That "business" is clearly the business of the Line, and that only. The Board's debentures are to cover ships and all property transferred, including such as exists on the Islands (sec. 15). The Commonwealth advances relate to the "working capital" of the Board, and that is one single conception. The "profits of the Line" (sec. 19) cannot be ascertained unless and until the result of any working operations under sec. 14 (4) are taken into account. The "balance-sheet" in sec. 22—and there is only one balance-sheet contemplated for each year—would be manifestly incomplete unless its operation under sub-sec. 4 of sec. 14 were included. Consequently I interpret the sub-section as saying that, while the Commonwealth's right, title and interest in and to the Islands are transferred to the Board, the Board is not to have "in respect of those Islands" the larger powers previously given in respect of the Line generally, but merely the power of doing there, for the purposes of the Line, work of the classes specified, with such incidental powers as will enable the Board to do that work efficiently.

That at once eliminates the suggested capacity of the Board to enter into what are really private trading contracts, with obligations to pay damages out of public moneys or by the sale of public property.

It was suggested that the capacity of the Board to enter into the agreement depended on a question of fact, namely, whether in the circumstances such an agreement would or could be assistant to the effective preservation or operation of the works as an authorized Commonwealth institution. I am unable to find such a meaning in sub-sec. 4 of sec. 14, and if I could, I should be unable to find its justification in the Constitution.

The sole question that emerges for determination under these demurrers—each of the two defendants puts in a separate demurrer—is whether it is or is not competent for the Shipping Board—a Commonwealth Government Board—created by the Act No. 3 of 1923 to tender for and contract to supply electric apparatus—six turbo-alternator sets and auxiliary plant—to an cutside body—here, the Municipal Council of Sydney.

The Commonwealth Attorney-General is a party plaintiff, submitting that it is not competent. I presume that he allows his name to be used in this litigation adversely to the Commonwealth Board in order that the question may be fairly tested. Another plaintiff is the Commonwealth itself. I do not know why; but no objection is taken to the procedure.

The Attorney-General sues on the relation of the secretary of a body called the Chamber of Manufactures of New South Wales; the manufacturers objecting, I presume, to the competition of the Board in manufacturing. The finances of the Commonwealth are involved: as to certain matters moneys may be spent or advanced by the Treasurer without even any appropriation by Parliament (sec. 16). The Municipal Council of Sydney is properly made a party defendant to the action impugning the contract to which it is a party.

Neither the specifications nor the printed conditions nor the sealed agreement have been fully set forth in the pleadings (see Rules of the High Court, Order XXIV., r. 6), nor have they been produced; but, as no objection is taken, probably we may deal with the demurrers as if the summary statements of the contents were exhaustive for the present purpose.

It should be clearly understood that the power of Parliament to pass this Act creating the Shipping Board is not impugned; and unless it be impugned it is our duty to assume that Parliament had power to pass the Act which it has passed in fact. The main, if not the only, question is as to the construction of the Act.

The heading of the Act shows, no doubt, its central aim—"An Act to provide for the establishment of the Commonwealth Shipping Line and for other purposes." A line of steamers is established (sec. 4); a Board of Directors is to be appointed by the Government for the purposes of the Act (sec. 6); the Board is to be a body corporate (sec. 7); the management of the Line is vested in the Board (sec. 12); certain existing merchant ships, stores, equipment, &c., belonging to the Commonwealth are vested in the Board at valuations, the Board issuing debentures therefor (secs. 13, 15); two Islands in Port Jackson (Cockatoo and Schnapper Islands) are also vested in the Board with all their improvements, dockyards, machinery, &c., and the management of the works and establishments on the Islands (sec. 14 (1), (2), (3)); and it is provided (sub-sec. 4) that "the Board shall have power to carry on in respect of these Islands the business of manufacturer, engineer, dock-owner, shipbuilder and repairer, and any other business incidental thereto or to the said works and establishments" It is on sec. 14 (4) that the Shipping Board mainly relies for its alleged power to tender for and supply electrical plant (for payment) to the outside public.

But there is a significant section to which I have not yet referred, a section which recalls the title of the Act and its dominating purpose —sec. 10: "The Board shall, in addition to any other powers conferred by this Act, have power—(a) to carry on the general business of a ship-owner, and any business incidental thereto; (b) to acquire and hold ships; (c) to acquire and hold on any tenure any land, offices, ship-yards, wharfs or other premises and any gear or equipment necessary for the purposes of carrying on the business of the Board ...; (g) to do anything incidental to any of its powers." The phrasing of this section echoes the phrasing of a memorandum of association which defines the objects of a company created under the Companies Acts, and limits its functions and powers; and although the section expressly does not exhaust all the powers of the Board, it is for the Board to show that a power to carry on an electrical engineering business is an additional power conferred by the Act. But in construing the expression used in sec. 14 (4), that the Board shall have power to carry on "in respect of those Islands" the business of manufacturer, engineer, &c., and any other business incidental thereto or to the said works and establishments, it is our duty to read the words as limited to the general nature of the business contemplated by sec. 10 as well as by the title. The special powers conferred by sec. 14 (4), however absolute in terms, are to be construed as subject to the special purposes of the original bond of association of the Board (Pickering v. Stephenson[2]; Osborne v. Amalgamated Society of Railway Servants[3]). The language of Lord Blackburn, used in River Wear Commissioners v. Adamson[4], though necessarily vague, has often been cited with approval:—"In all cases the object is to see what is the intention expressed by the words used. But, from the imperfection of language, it is impossible to know what that intention is without inquiring farther, and seeing what the circumstances were with reference to which the words were used, and what was the object, appearing from those circumstances, which the person using them had in view; for the meaning of words varies according to the circumstances with respect to which they were used."

It is my opinion, therefore, that the language of sec. 14 (4), however wide it may appear as "in respect of those Islands," must be read as restricted to the general purposes of a shipping business, not as extending to a general electrical engineering business; and that the demurrers should be overruled. It would be dangerous, however, to attempt to define affirmatively, by anticipation of developments, the limits of the powers conferred by such a section as sec. 14 (4).

Solicitors for the defendants, A. J. McLachlan, Westgarth & Co.; Dawson, Waldron, Glover & Edwards.

[1] (1923) A.C., at pp. 707, 708.

[2] (1872) L.R. 14 Eq. 322, at p. 340.

[3] (1909) 1 Ch. 163, at pp. 191, 192, per Farwell L.J.

[4] (1877) 2 App. Cas. 743, at p. 763.

High Court of Australia

Commonwealth v Australian Commonwealth Shipping Board [1926] HCA 39; (1926) 39 CLR 1 (1 November 1926)

HIGH COURT OF AUSTRALIA