Vacuum Oil Company Pty Ltd v Queensland (No 2) [1935] HCA 9; (1935) 51 CLR 677 (11 March 1935)

Vacuum Oil Company Proprietary Limited Plaintiff; and The State of Queensland and Others Defendants. [No. 2.]

Herring (with him Robert Menzies, A.-G. for the Commonwealth), for the defendant.

This is the trial of the action the main legal question in which has already been determined by this Court upon demurrer (Vacuum Oil Co. Pty. Ltd. v. Queensland[1]). Upon the demurrer it was held by the majority of the Court that the Motor Spirit Vendors Act 1933 of the State of Queensland offended against sec. 92 of the Commonwealth Constitution inasmuch as it required the importer and first vendor of motor spirit introduced into Queensland from the State of New South Wales for the purpose of marketing in the latter State, not only to take out a licence under sec. 3 of the Act but also, under sec. 6 thereof, to purchase and pay at the prescribed price for a quantity of power alcohol measured by a percentage of the total motor spirit sold by the licensee during the currency of his licence. The Queensland Act proceeded upon the assumption, held by this Court to be erroneous, that so long as, at the time of sale, motor spirit was situate in Queensland, the latter State could impose taxes upon or restrict the Queensland sales of the spirit without infringing sec. 92 of the Constitution. The Court's view was that, in the circumstances set out in the statement of claim and demurred to, the first sale of such of the plaintiff's motor spirit as had been introduced into that State from New South Wales, was covered by the protection of sec. 92 and the latter section was infringed when the Queensland Parliament compelled the first seller to purchase power alcohol as a condition of his right to sell the motor spirit within Queensland.

The action now stands for trial. The inter-State trade originally described in par. 11 of the statement of claim is now admitted to have existed (see mutual admissions of fact, pars. 2 and 3, statement of facts, pars. 4 and 5). It would appear from par. 9 of the statement of facts that in the year 1933, 9.5 per cent of the plaintiff's imports of motor spirit into Queensland were from the State of New South Wales and in 1934 the percentage was 5.73.

The plaintiff also contended that the course of business described in par. 12 of the statement of claim and also referred to in par. 5 of the mutual admissions of fact, was itself protected by sec. 92 of the Constitution. The essence of this part of the plaintiff's business is that the plaintiff company makes an offer in Melbourne to supply its customers with motor spirit in accordance with orders subsequently given by the customers at various centres throughout Australia. Later, the orders are given in Queensland by the customers to the plaintiff and the plaintiff in Queensland supplies and delivers to the customer from its stocks in Queensland and at the price stated in the tender and agreement, the quantity of motor spirit ordered.

Now, except for the original agreement in pursuance of which the later orders are given, the whole of such transactions take place within the State of Queensland. No part of the business so conducted necessarily requires the transport of a single gallon of motor spirit from one State of the Commonwealth into another. That being so, McArthur's Case[2] requires the conclusion that sec. 92 does not operate to protect the trade in question. In the latter case the then plaintiff company's trade in relation to Queensland comprised four types of transactions set out in pars. 8 to 11 respectively of the statement of claim[3]. The plaintiff succeeded only as to the fourth method of business and failed as to the first three[4]. The first three methods comprised the making of contracts for the sale of goods "which neither by the expressed terms of the contract nor by its implications are necessarily deliverable from any State but Queensland"[5].The only method of sale held protected was that which required inter-State transport of the very goods sold[6].

Therefore so far as the business described in par. 12 of the statement of claim is concerned we are of opinion that the plaintiff makes out no case of any infringement of sec. 92 of the Constitution.

A further question which was raised during the argument of the demurrer was whether the trade between New South Wales and Queensland in motor spirit might not be regarded as portion of the trade between Queensland and overseas countries from which the spirit was derived. This part of the case has not been separately argued or considered. In our opinion (as stated by Evatt J. in Vacuum Oil Co.'s Case[7]), it should be regarded as covered by McArthur's Case[8]. Most of the goods referred to in that case had been imported from overseas so that the warehouse of the then plaintiff in Sydney must have been regarded as the commencing point of an inter-State trade. It does not follow that the plaintiff company will be able to avoid the operation of such an Act as the Motor Spirit Vendors Act merely by diverting its oil tankers to Sydney so as to secure constitutional immunity under sec. 92. All the circumstances would require examination in order to determine whether what was being done was a real or pretended trade and commerce among the States.

That leaves us with the main question to determine. The plaintiff argued that, as the Queensland Act is inconsistent with sec. 92 of the Constitution in that a definite portion of the trade of the plaintiffs and other like importers is unlawfully hindered, the whole Act is rendered invalid. The contention of the defendants is that it is possible to separate the invalid part of the statute from that which is valid and the latter should be deemed good and effective.

The principle applicable to the case is not in any doubt, whatever difficulty there may be in its application. As Isaacs J. said in Roughley's Case[9]:—

The question is one of construction and it is necessary to determine whether, having regard to the legislative scheme, the Queensland Parliament can be assumed to have intended to make the Act applicable only to those persons and sales which are not entitled to the special protection of sec. 92 of the Constitution. There is nothing in the Act referring to the Commonwealth Constitution or sec. 92 thereof from which the inference can be drawn that the Parliament intended the Act to have a residual application if it were held that certain transactions could not be dealt with owing to the operation of sec. 92. We are therefore driven to examine the scheme of the Act. Its feature is contained in sec. 6, whereby the holder of a licence is required to purchase and pay for a quantity of power alcohol and that quantity is ascertained by reference to a percentage of "every one hundred gallons of motor spirit sold by him" during the currency of the licence. Sec. 6 further provides that, in calculating the number of gallons of motor spirit sold by the licensee, there shall be included only those sales in respect of which a licence is required to be held by him under sec. 3. But this does not mean that inter-State sales are or may be excluded. On the contrary, the reference back to sec. 3 shows that those sales must be included because although constituting part of the business of inter-State marketing, the spirit disposed of is "for delivery in Queensland" and is "at the time of such sale ... situate in Queensland" (sec. 3). Further, although sec. 3 requires a licence to be taken out by the vendor of motor spirit, it also provides that the person purchasing the motor spirit from the licensee is deemed to have complied with the Act upon proof that his vendor is licensed under its provisions.

It is clear from these closely interwoven provisions that the Act is aimed at the importer (and the first seller) of motor spirit introduced into Queensland for sale and is not aimed at persons purchasing from such importer. Upon the importer and upon him alone is thrown the statutory obligation to purchase power alcohol, and that obligation is measured, not by the use of any phrase which will enable inter-State sales to be removed from the calculation, but by reference to a totality of sales which necessarily includes sales in the course of trade and commerce among the States.

It is quite correct to say that the Legislature of Queensland could have (and has subsequently) used phraseology which would enable the Act to operate in respect of those transactions which are not protected by sec. 92 of the Constitution. But, in the statute as framed, sales which may lawfully be regulated, as well as sales which are not, are so wrapped up together in the statutory scheme that they "cannot be separated in the expression of the legislative will" and the result of attempting to apply the Act only to intra-State transactions would be to destroy what McTiernan J. described as "the balance which sec. 6 intended to establish between the amount of power alcohol and motor spirit marketed in Queensland"[11].

It is always possible for a State Parliament, by using appropriate language, to ensure that although a portion of the operation of its legislation may be defeated by sec. 92, that shall not prejudice the operation of the residue of the Act. But in the present case such language has not been used, so that the whole enactment must fall.

In our opinion there should be a declaration that until the passing of the recent amendment the whole Act was invalid.

This matter first came before the Court on demurrer, when it was decided that the burden imposed by the Act fell upon inter-State commerce and was in contravention of sec. 92 of the Constitution. This decision was given upon the argument of a demurrer and on that occasion the question did not arise whether the Queensland statute was wholly bad or whether it was severable. Subsequently the action was heard upon admissions of fact and was referred by Evatt J. to the Full Court. These facts proved the allegations contained in par. 2 of the statement of claim that some of the motor spirit which the plaintiff sells in Queensland is imported by the plaintiff into Queensland direct from overseas for sale in Queensland and some is brought by the plaintiff into Queensland from New South Wales for the same purpose. The facts also prove that the motor spirit was not imported into Queensland through New South Wales "by a continuous and unbroken course of transportation from overseas." The question of severability thus falls to be decided.

The statute does not merely provide machinery for regulating sales in Queensland but imposes on all motor spirit the burden of purchasing a quantity of power alcohol directly proportionate to the amount of motor spirit sold, and in order to carry this scheme out a system of licensing is prescribed. There is nothing in the statute to suggest that the Legislature contemplated the exclusion from this burden of motor spirit imported from other States. It contains nothing to distinguish or separate those matters which are within the power of the Legislature from those which are outside its competence. It is impossible, in my opinion, to unravel the provisions of the statute, which are interwoven in such a way as to embody a scheme which is uniform, general and comprehensive in its application (In re The Initiative and Referendum Act[12]). If its operation were limited to petrol not introduced from other States it would produce different commercial and economic results and have a different effect. The woof of invalid provisions is so woven with the warp of valid provisions that it is impossible to unravel the threads. The statute cannot, I think, be construed so as to operate only upon petrol imported directed from overseas and should be declared to be invalid.

This Court has already determined that the Motor Spirit Vendors Act 1933 of Queensland is invalid in so far as it hinders or interferes with inter-State trade (Vacuum Oil Co. Pty. Ltd. v. Queensland[13]). It is now contended that the Act is wholly invalid because the provisions of the Act are so connected together that it is impossible to give effect to them in part, or, in other words, so far as they affect the domestic or home trade of Queensland. I am unable to agree with the contention, for the reasons stated in W. & A. McArthur Ltd. v. Queensland[14], and particularly for those stated by me in Roughley v. New South Wales; Ex parte Beavis[15]. The invalidity of the Act, in so far as it affects the domestic trade of Queensland, depends upon the intent of the Queensland Parliament as gathered from the language of its own Act, and in no wise depends upon any provision of the Constitution, such as sec. 92 or sec. 109. There is nothing in the Act which leads me so to construe it as making its efficacy, as to the home trade of Queensland, depend upon its efficacy as to the inter-State trade. The Motor Spirit Vendors Act Amendment Act of 1934 (No. 35) is confirmatory of the opinion I have expressed on both aspects of the present case.

After the decision of this Court overruling the State of Queensland's demurrer to the plaintiff's statement of claim upon the ground that the Motor Spirit Vendors Act 1933 attempted to impair the freedom of inter-State trade by placing a burden upon importation[16], the action was brought to a hearing before Evatt J. upon admissions of fact. He has referred it to the Full Court. It appears that, although much the greater proportion of motor spirit consumed in Queensland is directly imported from overseas, yet a substantial trade is done in sending petrol from other States in tins and cases there manufactured and the plaintiff has an important share in this trade. The plaintiff thus has made out the allegations in its pleading from which it appeared that the plaintiff conducted a trade in petrol imported from New South Wales into Queensland for sale, a trade which we held could not be affected by the Motor Spirit Vendors Act 1933. Further, the plaintiff has negatived the possibility that the petrol so imported came through New South Wales into Queensland by a continuous and unbroken course of transportation from overseas, a course which might not, perhaps, be considered to involve inter-State trade. The plaintiff seeks relief against the application of the Queensland statute to any part of its trade, oversea as well as inter-State. Upon the present occasion, therefore, the question does arise whether, in consequence of the invalid attempt to include motor spirit introduced by the vendor from another State, the statute is wholly bad, or whether it is severable and can be given an operation upon petrol imported direct from overseas.

The enactment embodies a plan evidently closely considered and carefully worked out. The trade in motor spirit is treated uniformly and all motor spirit is required to bear the burden of the purchase of a proportionate amount of power alcohol. In order that all motor spirit may do so, every vendor of that commodity must obtain a licence, and, during its currency, purchase power alcohol to an amount bearing the prescribed proportion to the motor spirit he sells unless he acquires the motor spirit from or under a vendor who is himself licensed. This means that the first person to sell motor spirit after it reaches Queensland must be licensed. Unless he has failed to comply with that requirement, the buyer from him need not be licensed, and, unless both have failed to obtain licences, the next buyer of that motor spirit need not be licensed, and so on with successive buyers. It is apparent that this scheme assumes both that petrol coming to Queensland must go through the course it prescribes and that, under the machinery of the statute and the regulations made under it, all petrol will be traceable through successive sales. Motor spirit from vendors who import it from other States cannot be excluded from the operation of the statute without producing very important effects upon the practical application of the scheme. In the first place, such petrol will escape the burden intended to be imposed on all that is distributed in Queensland, and traders in petrol will be treated differentially and not uniformly. In the second place, if the attempt to require the first vendor of petrol from another State to obtain a licence is void, it seems a necessary consequence that sub-purchasers should also be free, because in respect of successive purchasers of a particular consignment of petrol the legislative requirement is not independent and severable. In the third place, the presence in the market of petrol outside the course of dealing prescribed by the statute and regulations would be productive of much difficulty in administering the provisions under which the distribution of petrol is checked. These considerations are material in determining whether the enactment is severable. The principles upon which that question must be decided appear to me to be well settled. Sec. 92 of the Constitution is a restraint upon the power of the States. One of its operations is to prevent the continuance under sec. 107 of the power of the Parliament of a Colony to restrict the freedom of inter-State trade, a power which by sec. 92 is, within the meaning of sec. 107, withdrawn from the Parliament of the State. State legislation which attempts to restrict the freedom of trade, commerce and intercourse among the States is simply ultra vires. When provisions of a statute extend beyond the powers of the legislature, the question whether it is wholly void or operates upon so much of the subject matter with which it deals as lies within those powers, depends altogether upon the interpretation of the statute itself. It must be examined to see if an intention appears of providing for the matters found to be outside the legislature's powers independently of the matters found to be within its powers. The statute will not operate upon the matters within the powers of the legislature unless it is capable of applying to them in the same way and with the same consequences to the persons and things affected. It is necessary that the legislation should be intended to operate distributively. Further, neither in the purpose disclosed by the enactment, the means adopted for carrying out the purpose, nor the manner in which the statute is expressed, must there appear reason for supposing that the legislature meant to deal with the matter as an indivisible whole. If these conditions are fulfilled, so much of the statute as does not exceed the powers of the legislature should receive the force of law. The requirement cannot be satisfied where conditions, qualifications and compensations exist in or extend into the invalid portion, but, nevertheless, relate to provisions in the remainder of the enactment, or where, under a single description, a uniform general rule is prescribed governing persons or transactions partly within and partly without the legislative power so that limitations and exceptions must be notionally inserted to reduce it to a lawful operation. "Such a result could only be accomplished by introducing qualifying phrases, indeed, by rewriting the clause and transforming it into one to which the legislature has not given its assent" (per Duff J., in delivering the judgment of the Privy Council in Attorney-General for Ontario v. Reciprocal Insurers[17], cited by Isaacs J. in Roughley v. New South Wales; Ex parte Beavis[18], where, at pp. 185-190, the authorities are collected and the principles are discussed).

The present case appears to me to be one in which the enactment should not be considered severable. As in the case of the Owners of S.S. Kalibia v. Wilson[19], it expresses under a single description a uniform rule for a class which extends beyond its powers. There is no reason to suppose that uniformity of treatment of the whole class did not enter into the determination of the legislative will. The scheme would have a different operation if the Act were separated and received a divisible application. Further, the working of the plan adopted for carrying out its purpose would be dislocated and rendered both different and more difficult, if not altogether ineffective.

For these reasons I think the plaintiff was at the time of the institution of the proceedings entitled to relief against the operation of the whole Act. Apart from the Motor Spirit Vendors Amendment Act of 1934, which was assented to on 12th December 1934, after the argument, there should, in my opinion, be a declaration that the Motor Spirit Vendors Act 1933 is invalid and inoperative. The parties have not directed our attention to the Act of 1934 and presumably desire us to deliver judgment independently of it. But I think we should qualify the declaration by referring to it. An appropriate declaration is that, up to the passing of the Motor Spirit Vendors Amendment Act of 1934, the Motor Spirit Vendors Act of 1933 was invalid and altogether inoperative.

Judgment for plaintiff with costs. Declare that, up to the passing of the Motor Spirit Vendors Amendment Act of 1934, the Motor Spirit Vendors Act of 1933 passed by the Parliament of Queensland was invalid and altogether inoperative.

[1] Ante, p. 108.

[2] [1920] HCA 77; (1920) 28 C.L.R. 530.

[3] (1920) 28 C.L.R., at pp. 532-533.

[4] (1920) 28 C.L.R., at pp. 560, 570.

[5] (1920) 28 C.L.R., at p. 560.

[6] (1920) 28 C.L.R., at p. 560.

[7] Ante, p. 139.

[8] [1920] HCA 77; (1920) 28 C.L.R. 530.

[9] (1928) 42 C.L.R., at p. 187.

[10] (1928) 42 C.L.R., at p. 190.

[11] Ante, p. 140.

[12] (1919) A.C. 935, at p. 944.

[13] Ante, p. 108.

[14] (1920) 28 C.L.R., at p. 559.

[15] (1928) 42 C.L.R., at pp. 206-208.

[16] Ante, p. 108.

[17] (1924) A.C. 328, at p. 346.

[18] [1928] HCA 48; (1928) 42 C.L.R. 162.

[19] [1910] HCA 77; (1910) 11 C.L.R. 689.

High Court of Australia

Vacuum Oil Company Pty Ltd v Queensland (No 2) [1935] HCA 9; (1935) 51 CLR 677 (11 March 1935)

HIGH COURT OF AUSTRALIA