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High Court of Australia |
H C of A
23 June 1927
Starke J.
Eager and Campton, for the plaintiff.
Owen Dixon K.C. and O'Bryan, for the defendant.
June 23
Starke J.
By an agreement dated 2nd June 1924 between the Boucaut Bay Co. Ltd. (hereinafter called the "contractor" ) and the Commonwealth, the contractor agreed to provide and maintain an efficient coastal shipping service in the Northern Territory, in manner and on terms more particularly set forth in the agreement for a period of three years from 21st April 1924. For and in consideration of the services agreed to be rendered, the Commonwealth agreed to pay a subsidy at the rate of £6,000 per annum, payable quarterly. The contractor lodged with the Minister of State for Home and Territories the sum of £250 for the due and faithful performance of the service hereinbefore mentioned pursuant to clause 19 of the agreement. Clause 15 of the agreement provided: "If at any time the Minister shall have reason to believe that this agreement is not being carried out by the contractor in accordance with the terms and true intent and meaning of this agreement then and in any of the said cases the Minister may by one calendar month's notice in writing to the contractor determine this agreement" and "upon the expiration of such one calendar month's notice this agreement shall absolutely cease and determine." Clause 19 provided further "If this agreement is determined by the Minister under clause 15 of this agreement the Minister may ... by notice in writing declare that the said amount of £250 ... is forfeited to the Commonwealth and thereupon the said sum of £250 ... shall be the property of the Commonwealth absolutely." On 27th February the Minister gave the following notice in writing determining the agreement and forfeiting the sum of £250:—"To Boucaut Bay Company Limited, 440 Little Collins Street, Melbourne.—Take notice:—Whereas I, George Foster Pearce, the Minister of State for Home and Territories of the Commonwealth of Australia, have reason to believe that the agreement made the second day of June 1924 between the Commonwealth of Australia and Boucaut Bay Company Limited, having its registered office at 440 Little Collins Street, Melbourne, in the State of Victoria, with respect to the provision and maintenance by the said Company of an efficient coastal shipping service in the Northern Territory is not being carried out by the said Company in accordance with the terms and true intent and meaning of the said agreement: Now therefore I, the said Minister, do hereby pursuant to the powers conferred on me by clause 15 of the said agreement determine the said agreement as from the expiration of one calendar month after the date upon which this notice is served upon the said Company And I do hereby pursuant to the powers conferred on me by clause 19 of the said agreement declare that the sum of two hundred and fifty pounds (£250) which has been lodged with me by the said Company as security for the due and faithful performance of the said shipping service is forfeited to the Commonwealth.—Dated this twenty-seventh day of February 1925.—(Sgd.) G. F. Pearce, Minister of State for Home and Territories."
The contractor in this action sues the Commonwealth for damages for unlawfully determining the agreement and for the recovery of the sum of £250 on the ground that it has not been rightfully forfeited to the Commonwealth or is a penalty merely, the Commonwealth being entitled only to the damages actually sustained by reason of any breach of the agreement on the contractor's part.
The main question in this case is, of course, the true meaning of the words in clause 15 "if at any time the Minister shall have reason to believe." The argument submitted to me was that the Minister's power to determine the agreement was dependent upon some reason justifying a belief that the agreement was not being carried out in accordance with the terms and true intent and meaning of the agreement. It followed, according to the argument, that the Court must determine for itself whether facts exist which would reasonably lead to the belief that the agreement was not being so carried out. This view of the clause I cannot adopt. In my opinion, the belief of the Minister is "the sole condition of his authority" ; "he is the sole judge of the sufficiency of the materials on which he forms it" (Lloyd v. Wallach[1] ). If a man is to form a belief and his belief is to govern, he must form it himself on such reasons and grounds as seem good to him (Allcroft v. Lord Bishop of London[2] ). He must not act dishonestly, capriciously or arbitrarily: that would be contrary to the implication of the agreement and so establish a want of the belief stipulated for as a condition of the exercise of the power of determination. So long, however, as the Minister acts upon circumstances appearing to him to bear upon the case and giving him a rational ground for the belief entertained, then, in my opinion, the Courts of law cannot and ought not to interfere with his discretion. Upon the facts the Minister had ample materials on which to found his belief set forth in the notice of 27th February 1925, and I find as a fact that the Minister bona fide and honestly formed and held that belief.
It was then contended that the Minister was not entitled to act upon clause 15 without giving the contractor an opportunity of being heard and of meeting allegations to its prejudice (Gillen v. Laffer[3] ). Some dissatisfaction had been expressed by the Home and Territories Department and, apparently, in Parliament and in the Press, as to the suitability of the Huddersfield, one of the contractor's vessels employed in the Northern Territory shipping service; and in January 1925 two of the directors of the contractor interviewed the Minister. They lodged with him a statement of their views and sought to justify the various charges that had been made in connection with a search expedition upon which the Huddersfield had been employed. I accept, substantially, the accounts of Messrs. Fogarty and Fripp of this interview. I do not think the Minister was at that time considering the question of cancelling the agreement nor do I think any such possibility was brought home to the directors of the contractor. No doubt the statement lodged by the contractor with the Minister covered a good deal of the ground which the Minister afterwards considered in arriving at his decision to determine the agreement, but the question of determining the agreement only arose, in my opinion, after the Minister saw the Administrator, Mr. Urquhart, about February 1925. His decision to determine the agreement was then based upon the inefficiency of the vessels employed by the contractor in the Northern Territory shipping service and the disorganization of the contractor's business arrangements at Darwin. The contractor had no fair or sufficient notice of the extent of the grounds upon which the Minister proceeded and no opportunity of answering them, if the Minister was bound to give it any such notice. In my opinion, however, the Minister was not, in point of law, bound to give any such notice. Again the question turns upon the true meaning of clause 15. If the clause places the Minister in a judicial or quasi-judicial position then no doubt the rule Audi alteram partem applies (Wood v. Woad[4] ); if, however, the clause gives the Minister absolute power to determine the agreement without anything in the nature of a judicial inquiry, the rule has no application. Whether the authority is judicial or absolute must turn upon the terms of the particular agreement. Gillen v. Laffer[5] , by which I am bound, is an illustration of the former class; this case, in my opinion, belongs to the latter. The Minister is empowered to act on his own belief or opinion uncontrolled by the Courts, if that belief is honestly entertained. It is, in truth, a power given for the protection of the Commonwealth and as a convenient and decisive test of non-performance of the agreement. No words are introduced as in Gillen v. Laffer suggesting evidence or any quasi-judicial inquiry, and there is nothing in the agreement suggesting an obligation upon the Minister "to act as a tribunal, or to state the grounds on which he decides for himself" (cf. Russell v. Russell[6] ). In my opinion, therefore, the agreement dated 2nd June 1924 was lawfully determined by the notice of February 1925.
These views also dispose of the claim for the sum of £250 deposited by the contractor for the due and faithful performance of the service, unless the contention can be sustained that the provision for its forfeiture is merely a penalty. Such cases as Pye v. British Automobile Commercial Syndicate Ltd.[7] , Sprague v. Booth[8] and Dunlop Pneumatic Tyre Co. v. New Garage and Motor Co.[9] show that the contention is untenable.
[The learned Judge then dealt with other claims by the plaintiff. One he found in favour of the plaintiff for £460, but as to all other claims by the plaintiff, he found against the plaintiff. The judgment then continued:—]
In result, the defendant has substantially succeeded and must have the general costs of the action, except in so far as any such costs have been increased by the plaintiff's claim alleged in pars. 7, 8 and 9 of the amended statement of claim and the defence of the Commonwealth thereto (cf. Jenkins v. Jackson[10] ). On the claim so excepted the parties will abide their own costs, for neither has wholly succeeded. The amount awarded to the contractor and the costs will be set off one against the other (see Pringle v. Gloag[11] ).
Judgment for the plaintiff for £460 in respect of the plaintiff's claim for "standing by" of the auxiliary schooner Huddersfield in par. 7 of the amended statement of claim alleged. Judgment for the defendant upon all other claims made by the plaintiff in this action. The plaintiff to pay the defendant the general costs of this action including shorthand notes and discovery except in so far as such costs have been increased by the plaintiff's claim alleged in pars. 7, 8 and 9 of the amended statement of claim and the defence of the Commonwealth thereto. Each party to abide its own costs of the claim raised by the said paragraphs and the defence thereto. Order that the defendant's costs of the action aforesaid be set off against the said sum of £460 and the Principal Registrar shall certify to whom after such set off the balance is due. Order that such balance be paid by the party from whom to the party to whom the same shall be certified to be due.
Order accordingly.
Appeal dismissed with costs.
Solicitors for the appellant, McLaughlin, Eaves & Johnston.
Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.
H C of A
26 October 1927
Isaacs A.C.J., Gavan Duffy, Powers and Rich JJ.
Eager and Campton, for the plaintiff.
Owen Dixon K.C. and O'Bryan, for the defendant.
June 23
Starke J.
By an agreement dated 2nd June 1924 between the Boucaut Bay Co. Ltd. (hereinafter called the "contractor" ) and the Commonwealth, the contractor agreed to provide and maintain an efficient coastal shipping service in the Northern Territory, in manner and on terms more particularly set forth in the agreement for a period of three years from 21st April 1924. For and in consideration of the services agreed to be rendered, the Commonwealth agreed to pay a subsidy at the rate of £6,000 per annum, payable quarterly. The contractor lodged with the Minister of State for Home and Territories the sum of £250 for the due and faithful performance of the service hereinbefore mentioned pursuant to clause 19 of the agreement. Clause 15 of the agreement provided: "If at any time the Minister shall have reason to believe that this agreement is not being carried out by the contractor in accordance with the terms and true intent and meaning of this agreement then and in any of the said cases the Minister may by one calendar month's notice in writing to the contractor determine this agreement" and "upon the expiration of such one calendar month's notice this agreement shall absolutely cease and determine." Clause 19 provided further "If this agreement is determined by the Minister under clause 15 of this agreement the Minister may ... by notice in writing declare that the said amount of £250 ... is forfeited to the Commonwealth and thereupon the said sum of £250 ... shall be the property of the Commonwealth absolutely." On 27th February the Minister gave the following notice in writing determining the agreement and forfeiting the sum of £250:—"To Boucaut Bay Company Limited, 440 Little Collins Street, Melbourne.—Take notice:—Whereas I, George Foster Pearce, the Minister of State for Home and Territories of the Commonwealth of Australia, have reason to believe that the agreement made the second day of June 1924 between the Commonwealth of Australia and Boucaut Bay Company Limited, having its registered office at 440 Little Collins Street, Melbourne, in the State of Victoria, with respect to the provision and maintenance by the said Company of an efficient coastal shipping service in the Northern Territory is not being carried out by the said Company in accordance with the terms and true intent and meaning of the said agreement: Now therefore I, the said Minister, do hereby pursuant to the powers conferred on me by clause 15 of the said agreement determine the said agreement as from the expiration of one calendar month after the date upon which this notice is served upon the said Company And I do hereby pursuant to the powers conferred on me by clause 19 of the said agreement declare that the sum of two hundred and fifty pounds (£250) which has been lodged with me by the said Company as security for the due and faithful performance of the said shipping service is forfeited to the Commonwealth.—Dated this twenty-seventh day of February 1925.—(Sgd.) G. F. Pearce, Minister of State for Home and Territories."
The contractor in this action sues the Commonwealth for damages for unlawfully determining the agreement and for the recovery of the sum of £250 on the ground that it has not been rightfully forfeited to the Commonwealth or is a penalty merely, the Commonwealth being entitled only to the damages actually sustained by reason of any breach of the agreement on the contractor's part.
The main question in this case is, of course, the true meaning of the words in clause 15 "if at any time the Minister shall have reason to believe." The argument submitted to me was that the Minister's power to determine the agreement was dependent upon some reason justifying a belief that the agreement was not being carried out in accordance with the terms and true intent and meaning of the agreement. It followed, according to the argument, that the Court must determine for itself whether facts exist which would reasonably lead to the belief that the agreement was not being so carried out. This view of the clause I cannot adopt. In my opinion, the belief of the Minister is "the sole condition of his authority" ; "he is the sole judge of the sufficiency of the materials on which he forms it" (Lloyd v. Wallach[12] ). If a man is to form a belief and his belief is to govern, he must form it himself on such reasons and grounds as seem good to him (Allcroft v. Lord Bishop of London[13] ). He must not act dishonestly, capriciously or arbitrarily: that would be contrary to the implication of the agreement and so establish a want of the belief stipulated for as a condition of the exercise of the power of determination. So long, however, as the Minister acts upon circumstances appearing to him to bear upon the case and giving him a rational ground for the belief entertained, then, in my opinion, the Courts of law cannot and ought not to interfere with his discretion. Upon the facts the Minister had ample materials on which to found his belief set forth in the notice of 27th February 1925, and I find as a fact that the Minister bona fide and honestly formed and held that belief.
It was then contended that the Minister was not entitled to act upon clause 15 without giving the contractor an opportunity of being heard and of meeting allegations to its prejudice (Gillen v. Laffer[14] ). Some dissatisfaction had been expressed by the Home and Territories Department and, apparently, in Parliament and in the Press, as to the suitability of the Huddersfield, one of the contractor's vessels employed in the Northern Territory shipping service; and in January 1925 two of the directors of the contractor interviewed the Minister. They lodged with him a statement of their views and sought to justify the various charges that had been made in connection with a search expedition upon which the Huddersfield had been employed. I accept, substantially, the accounts of Messrs. Fogarty and Fripp of this interview. I do not think the Minister was at that time considering the question of cancelling the agreement nor do I think any such possibility was brought home to the directors of the contractor. No doubt the statement lodged by the contractor with the Minister covered a good deal of the ground which the Minister afterwards considered in arriving at his decision to determine the agreement, but the question of determining the agreement only arose, in my opinion, after the Minister saw the Administrator, Mr. Urquhart, about February 1925. His decision to determine the agreement was then based upon the inefficiency of the vessels employed by the contractor in the Northern Territory shipping service and the disorganization of the contractor's business arrangements at Darwin. The contractor had no fair or sufficient notice of the extent of the grounds upon which the Minister proceeded and no opportunity of answering them, if the Minister was bound to give it any such notice. In my opinion, however, the Minister was not, in point of law, bound to give any such notice. Again the question turns upon the true meaning of clause 15. If the clause places the Minister in a judicial or quasi-judicial position then no doubt the rule Audi alteram partem applies (Wood v. Woad[15] ); if, however, the clause gives the Minister absolute power to determine the agreement without anything in the nature of a judicial inquiry, the rule has no application. Whether the authority is judicial or absolute must turn upon the terms of the particular agreement. Gillen v. Laffer[16] , by which I am bound, is an illustration of the former class; this case, in my opinion, belongs to the latter. The Minister is empowered to act on his own belief or opinion uncontrolled by the Courts, if that belief is honestly entertained. It is, in truth, a power given for the protection of the Commonwealth and as a convenient and decisive test of non-performance of the agreement. No words are introduced as in Gillen v. Laffer suggesting evidence or any quasi-judicial inquiry, and there is nothing in the agreement suggesting an obligation upon the Minister "to act as a tribunal, or to state the grounds on which he decides for himself" (cf. Russell v. Russell[17] ). In my opinion, therefore, the agreement dated 2nd June 1924 was lawfully determined by the notice of February 1925.
These views also dispose of the claim for the sum of £250 deposited by the contractor for the due and faithful performance of the service, unless the contention can be sustained that the provision for its forfeiture is merely a penalty. Such cases as Pye v. British Automobile Commercial Syndicate Ltd.[18] , Sprague v. Booth[19] and Dunlop Pneumatic Tyre Co. v. New Garage and Motor Co.[20] show that the contention is untenable.
[The learned Judge then dealt with other claims by the plaintiff. One he found in favour of the plaintiff for £460, but as to all other claims by the plaintiff, he found against the plaintiff. The judgment then continued:—]
In result, the defendant has substantially succeeded and must have the general costs of the action, except in so far as any such costs have been increased by the plaintiff's claim alleged in pars. 7, 8 and 9 of the amended statement of claim and the defence of the Commonwealth thereto (cf. Jenkins v. Jackson[21] ). On the claim so excepted the parties will abide their own costs, for neither has wholly succeeded. The amount awarded to the contractor and the costs will be set off one against the other (see Pringle v. Gloag[22] ).
Judgment for the plaintiff for £460 in respect of the plaintiff's claim for "standing by" of the auxiliary schooner Huddersfield in par. 7 of the amended statement of claim alleged. Judgment for the defendant upon all other claims made by the plaintiff in this action. The plaintiff to pay the defendant the general costs of this action including shorthand notes and discovery except in so far as such costs have been increased by the plaintiff's claim alleged in pars. 7, 8 and 9 of the amended statement of claim and the defence of the Commonwealth thereto. Each party to abide its own costs of the claim raised by the said paragraphs and the defence thereto. Order that the defendant's costs of the action aforesaid be set off against the said sum of £460 and the Principal Registrar shall certify to whom after such set off the balance is due. Order that such balance be paid by the party from whom to the party to whom the same shall be certified to be due.
Order accordingly.
Appeal dismissed with costs.
Solicitors for the appellant, McLaughlin, Eaves & Johnston.
Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.
1. [1915] HCA 60; (1915) 20 C.L.R. 299, at p. 304.
2. (1891) A.C. 666, at p. 678.
3. [1925] HCA 50; (1925) 37 C.L.R. 210.
5. [1925] HCA 50; (1925) 37 C.L.R. 210.
6. (1880) 14 Ch. D. 471, at p. 480.
7. (1906) 1 K.B. 425, at p. 430.
9. [1914] UKHL 1; (1915) A.C. 79, at pp. 92-93.
10. (1891) 1 Ch. 89, at p. 92.
12. [1915] HCA 60; (1915) 20 C.L.R. 299, at p. 304.
13. (1891) A.C. 666, at p. 678.
14. [1925] HCA 50; (1925) 37 C.L.R. 210.
16. [1925] HCA 50; (1925) 37 C.L.R. 210.
17. (1880) 14 Ch. D. 471, at p. 480.
18. (1906) 1 K.B. 425, at p. 430.
20. [1914] UKHL 1; (1915) A.C. 79, at pp. 92-93.
21. (1891) 1 Ch. 89, at p. 92.
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