R v Gates [1928] HCA 39; (1928) 41 CLR 519 (26 November 1928)

The applicant, Silas Young Maling, was charged with and convicted of an offence against the provisions of the New South Wales Secret Commissions Prohibition Act 1919, in that he, being an agent, within the meaning of that Act, of the Municipal Council of Sydney, did corruptly receive from Babcock & Wilcox Ltd. a sum of money as a reward for having recommended the Council to accept a tender submitted by the Company to the Council in connection with steam-raising plant for an electric power station.

He applied to the Supreme Court of New South Wales for a prohibition on a number of grounds, of which the following only are now material to be stated: "(6) that on the undisputed facts the offence charged was punishable under the Federal Secret Commissions Act 1905 and not under the New South Wales Secret Commissions Prohibition Act 1919; (7) that on the true construction of the New South Wales Secret Commissions Prohibition Act 1919 it did not apply to the facts proved in evidence; (8) that, if on the true construction of the New South Wales Secret Commissions Prohibition Act 1919 that Act applied to the present case, it was inconsistent with the Commonwealth Secret Commissions Act 1905 and void to the extent of the inconsistency; (9) that the magistrate was in error in allowing in evidence the conversations between Inspector of Police MacKay and the defendant alleged to have taken place in New Zealand."

The Supreme Court held that all the grounds relied on by the applicant in support of his application except those numbered 6, 7 and 8 failed, but, being of opinion that under the last-mentioned grounds a question arose within the meaning of sec. 40A of the Judiciary Act as to the limits inter se of the constitutional powers of the Commonwealth and of the State of New South Wales, proceeded no further in the matter; which thereupon by force of that section was removed into this Court. The only grounds relied on in argument before this Court were those set out above, namely, 6, 7, 8 and 9. Mr. Flannery for the respondents contended that it was not open to the applicant to rely in this Court on ground 9, the matter raised by that ground having been decided by the Supreme Court; but, as the Court after hearing Dr. Evatt was unanimously of opinion that the ground referred to could not be sustained, it became unnecessary to express any opinion on the question raised by Mr. Flannery. As to this ground it is sufficient to say that there is nothing in the evidence to suggest that the statements made by the applicant to Inspector MacKay were not made voluntarily or that they were induced by any untrue representation made to him or by any threat or promise held out to him by the inspector of police.

The argument for the applicant in support of grounds 6, 7 and 8 was that the conviction under the State Act was bad because the facts proved disclosed an offence against the provisions of the Federal Act, which were intended to and did cover the whole subject of secret commissions received in connection with trade and commerce with other countries or among the States. This argument was necessarily founded on the proposition that in the transaction between the Council and Babcock & Wilcox Ltd. in connection with which the money was received by the applicant the Council was engaged in trade and commerce with other countries or among the States, for the application of the Federal Act is by sec. 2 expressly limited to such trade and commerce and to certain agencies and contracts not material to this case. The first question for decision, therefore, is whether the contract between the Council and Babcock & Wilcox Ltd. comes within the description "trade and commerce with other countries and among the States." That contract is contained in articles of agreement dated 5th May 1926 and certain conditions, plans, specifications and letters expressly incorporated therein. The articles recite that the Council was desirous of having certain works done and materials supplied, namely, steam-raising plant Bunnerong power station (all thereinafter referred to as the said works), and that the Company had agreed to execute the said works for the sum of £603,447, and the Company thereby agrees in consideration of the sum above mentioned to execute and complete the said works. Clause 1 of the specification, which forms part of the contract, is, so far as material, in the words following:—"This specification covers the supply, delivery, erection, testing and maintenance at the purchaser's power station, in the Municipality of Randwick on the shore of Botany Bay, New South Wales, of steam boilers and auxiliary plant, automatic stokers, mechanical draft plant, piping, valves and fittings as hereafter specified. The whole of the works shall be carried out to the satisfaction of the engineer, in accordance with the regulations of the New South Wales Government and the recommendations of the British Engineering Standards Association last published prior to the date for closing of tenders so far as they apply. Where this specification conflicts with those recommendations this specification shall be adhered to. The contract includes the provision and fixing into place of everything proper, necessary or usually supplied for the effective and convenient working of the plant and for the protection of the purchaser's employees, whether such thing is specified, mentioned or shown on the drawings or not." Clause 33 of the general conditions incorporated in the agreement provides that the plant, when created on the site, shall be deemed to have been taken over by the Council when the engineer shall have certified in writing that the plant has fulfilled the contract conditions. "Plant" is defined as meaning and including plant and materials to be provided and work to be done by the contractor under the contract.

It is apparent from the documents incorporated in the agreement that both parties to it contemplated and intended that a considerable part of the material to be used in the performance of the contract was to be manufactured in Great Britain or elsewhere and imported into Australia after the date of the agreement. Dr. Evatt argued that the agreement was one for the sale of goods or for the supply of materials to be imported into Australia from other countries, that the importation of goods into Australia from abroad constituted trade and commerce with other countries, and that it followed that the Council in entering into this contract was engaged in such trade and commerce. He argued further that the mere fact that the contract provided for work and labour to be done by the contractor in New South Wales in relation to the materials supplied did not alter its character.

In our opinion this contention cannot be sustained. The contract on its true construction is not a contract for the supply in New South Wales of parts necessary for the construction and erection of a steam-boiler and mechanical draft plant but an entire and indivisible contract to do the necessary work and to provide the necessary materials to bring into existence, complete and ready for commercial use a distinct unit, namely, a steam-raising plant affixed to the soil of New South Wales. This view is supported not only by the language of par. 1 of the specification set out above, but also by par. 33 of the general conditions, the effect of which, read in conjunction with par. 24 of the same conditions, is to make the right of the contractor to receive payment of the contract price dependent on a certificate of the engineer that the plant, including work agreed to be done, has fulfilled the contract conditions—a certificate which could only properly be given after the "tests on completion" provided for by par. 32 had been made. It appears from the specification that these tests could not be carried out until the plant was erected and ready for working (specification, par. 39). Adopting the words of Denman J. in Anglo-Egyptian Navigation Co v Rennie[1], "a careful perusal of the specification seems to us to establish that the contract was for one entire job." This being the character of the contract, we think it is clear that it is not "trade or commerce with foreign countries or among the States." It follows that the Council in relation to this contract was not engaged in such trade or commerce and that the Federal Secret Commissions Act has no application.

Silas Young Maling was convicted under the Secret Commissions Prohibition Act of 1919 of New South Wales of corruptly receiving a bribe of £10,600 for recommending the Municipal Council of Sydney to accept a tender of Babcock & Wilcox Ltd. to the Council for the erecting of a steam-raising plant in the Bunnerong power station in the State of New South Wales. He was sentenced to imprisonment with hard labour for six months and to pay a fine of £500.

The conviction, it is said, is erroneous, not because Maling did not receive the bribe, but because he received it in connection with an act or transaction in foreign trade, or, to adapt the words of the Constitution, sec. 51 (I.), in connection with trade and commerce with another country, namely, Great Britain, and was liable to prosecution under the Federal Act only—the Secret Commissions Act of 1905.

The contention is based on the proposition that if the State Act purports to apply to the facts of this case, it is invalid because of the provisions of sec. 109 of the Constitution, and it raises the question whether the bribe received by Maling was in respect of an act or transaction in foreign trade. McArthur's Case[2] gives the expression "trade and commerce" a very comprehensive meaning. Foreign trade, I apprehend, "comprehends intercourse for the purposes of trade in any and all its forms, including the transportation, purchase, sale, and exchange of commodities between the citizens of our country and the citizens or subjects of other countries" (Welton v Missouri[3]). Every movement of commodities between Australia and England, and every negotiation, contract and dealing looking to that movement falls within its scope. The expression "foreign trade" embraces not only the movement of commodities, but also the carriage of persons and the interchange of information between Australia and other countries (Western Union Telegraph Co v Pendleton[4]). "All the commercial dealings and all the accessory methods ... to initiate, continue and effectuate the movement of persons and things" between Australia and other countries are "parts of the concept, because they are essential for accomplishing the acknowledged end" (McArthur's Case[5]). Foreign trade "is a practical conception," and the character of a given transaction must be determined, as a matter of fact, in each particular case.

Babcock & Wilcox Ltd., an English company which also carried on business in Australia, lodged a tender with the Municipal Council of Sydney, and offered to supply, deliver, erect, test and maintain, at the Council's power station on the shore of Botany Bay, New South Wales, steam-boilers and auxiliary plant, automatic stokers, mechanical draft plant, piping, valves and fittings, and to fix in place everything proper, necessary or usually supplied for the effective and convenient working of the plant. Maling recommended this tender to the Council and corruptly accepted the bribe already mentioned for so doing.

Now, it was said that the tender constituted an offer to sell plant on the part of Babcock & Wilcox Ltd., and to move goods in fulfilment of that offer between Great Britain and Australia. The offer was clearly not an offer of a contract for the sale of goods, but of a contract for work and labour, and the supply of plant and materials as accessory to the offer (Lee v Griffin[6]; Benjamin on Sales, 5th ed., pp. 151-168). It was very truly said, however, that there may be foreign trade without a sale of commodities, and that the real question to be determined in this case is whether the contract or dealing between the parties looked to the movement of commodities between Australia and another country. The tender of Babcock & Wilcox Ltd. to the Municipal Council of Sydney merely offered to erect a plant in the power-house at Botany Bay, and described the place of manufacture and the country from which Babcock & Wilcox Ltd. would despatch that plant to Australia. The offer was made in Australia and was to erect a plant here. That offer was purely local or domestic, and the fact that Babcock & Wilcox Ltd. would itself engage in an act of foreign trade in bringing the plant to Australia in no wise alters the domestic and local character of the offer. And no inspection or right of inspection of the plant here or abroad could or does alter the domestic character of the offer or render it an act or transaction in foreign trade.

It is unnecessary, in this view, to consider the argument that the State Act is inconsistent with the Federal Act, and therefore rendered invalid to the extent of the inconsistency by the provisions of sec. 109 of the Constitution.

The rule nisi for a writ of prohibition should be discharged, and the conviction thereby affirmed.

Solicitor for the respondents, J. V. Tillett, Crown Solicitor for New South Wales.

[1] (1875) L.R. 10 C.P., at p. 283.

[2] (1920) 28 C.L.R., at pp. 546-550.

[3] [1875] USSC 187; (1875) 91 U.S. 275, at p. 280.

[4] [1887] USSC 221; (1887) 122 U.S. 347.

[5] (1920) 28 C.L.R., at p. 549.

[6] [1861] EngR 589; (1861) 1 B. & S. 272.

High Court of Australia

R v Gates [1928] HCA 39; (1928) 41 CLR 519 (26 November 1928)

HIGH COURT OF AUSTRALIA