Barley Marketing Board (NSW) v Norman [1990] HCA 50; (1990) 171 CLR 182 (27 November 1990)

HIGH COURT OF AUSTRALIA

BARLEY MARKETING BOARD (N.S.W.) v. NORMAN [1990] HCA 50; (1990) 171 CLR 182
F.C. 90/047

Constitutional Law (Cth)

High Court of Australia
Mason C.J.(1), Brennan(1), Deane(1), Dawson(1), Toohey(1), Gaudron(1) and McHugh(1) JJ.

CATCHWORDS

Constitutional Law (Cth) - Freedom of interstate trade and commerce - Marketing board - Compulsory acquisition of primary commodity - Application to that commodity sold to interstate buyer - The Constitution (63 & 64 Vict. c. 12), s. 92 - Marketing of Primary Products Act 1983 (N.S.W.), ss. 56, 58.

HEARING

1990, June 5, 6; November 27. 27:11:1990
CASE STATED.

DECISION

MASON C.J., BRENNAN, DEANE, DAWSON, TOOHEY, GAUDRON AND McHUGH JJ. This case stated by the Chief Justice raises for consideration the validity of ss.56 and 58 of the Marketing of Primary Products Act 1983 (N.S.W.) ("the Act") and of a proclamation made by the Governor of New South Wales under the Act to the extent that those sections and that proclamation purport to apply to the trade and commerce of the defendants or any of them. The suggested ground of invalidity is that the sections and proclamation, in so far as they would so apply, are contrary to the provisions of s.92 of the Constitution.

2. The plaintiff is The Barley Marketing Board for the State of New South Wales. It was constituted as a board under the Marketing of Primary Products Act 1927 (N.S.W.) ("the previous Act") on 21 January 1972. It is deemed to have been constituted under the Act (s.162; Sched.4, cl.2(1)(a)). It has not been suggested that anything turns upon the differences between the provisions of the present Act and the provisions of the previous Act and it will, at times, be convenient to refer to the provisions of the Act as if they had at all times been the applicable statutory provisions.

3. Under the Act, a board is constituted for a specific primary product and in relation to a specific area (s.10(1)(a)). The plaintiff is constituted as a marketing board for barley produced in the State of New South Wales. As a board constituted under the Act it is a corporation entrusted with, and empowered to exercise, the functions conferred or imposed on it by the Act (s.11(2)). The agreed facts for the purposes of the case stated summarize the historical background of the plaintiff's establishment. That history is agreed to be as follows.
Historical Background

4. Notwithstanding the enactment of the previous Act in 1927, grain continued to be produced and disposed of in New South Wales on a free market basis. In 1939, after the outbreak of World War II, the Commonwealth intervened to establish national marketing schemes for all grain stock. In 1948, the Commonwealth enacted legislation to continue the Wheat Board and a wheat marketing scheme. Other boards which controlled coarse grains discontinued operations and all coarse grains (other than rice) were again disposed of by producers on a free market basis. One of the features of the wheat system was a guaranteed "cost of production" payment to the producers based upon the same price throughout Australia on a "Natural Terminal Ports" basis less individual freight from the country receival point.

5. Wheat had and continues to have far the largest volume of production of any grain in Australia. In New South Wales, wheat production is currently approximately five times that of barley. Most grain farmers produce barley as well as wheat in crop rotation techniques. Oats, sorghum, other coarse grains, oil seeds, rice and a variety of large scale vegetable crops are similarly produced.

6. By 1969, several factors had combined to produce an economic climate which was suitable for the formation of grain boards generally. According to the agreed facts, these factors included the following:
"(a) The outlets for the production of wheat were
controlled by the Wheat Board - flour milling, export
etc. However, there were no controls in New South
Wales on outlets for barley and oats or on outlets for
the summer crop of sorghum in the northern part of the
State of New South Wales.
(b) The intensive livestock industry, mainly poultry, had
not emerged to what it is today and most stockfeed
manufacturers were adjuncts to flour mills to utilise
bran and pollard which was sold at a fixed price being
a wheat derivative product.
(c) Drought feeding of livestock, mainly sheep, became the
main outlet for oats and barley and there was constant
demand from the coastal dairy industry in the state of
New South Wales.
(d) Modern transport by motor lorry had reduced the demand
for oats with the superseding of the horse for farm
work and commercial transport.
(e) The malting industry was dependent upon barley, but
this industry did not require all the barley produced.
(f) The cycle of good production years and drought
resulted in huge variations in values of grain other
than wheat.
(g) All of these factors, combined with the uncertainty
of a high price for oats and barley and with the
guaranteed cost of production for wheat, meant that
the producers turned more to wheat production.
(h) Export potential for oats and barley did exist. But
internal costs of bags, rail freight etc. to put them
to F.O.B. situation usually amounted to one third of
the value of the goods. When related to a price at
country receival point, the export value was generally
well below the local market values hence there was
little chance of exporting surpluses.
(i) Increased production of sorghum in north/west of New
South Wales and in Queensland in response to a demand
from Japan together with the ability to handle in
bulk, and the willingness of the New South Wales
Government owned Grain Elevators to handle sorghum
(which was out of season to Wheat) resulted in the
successful export of sorghum in bulk ship loads.
(j) Wheat production quotas for farmers were introduced
by the Wheat Board in the late 1960's as a result of
world over production of wheat which forced producers
to seek alternate cash crops such as oats and barley.
(k) In the winter rainfall area in the south of New South
Wales, oats and barley were the only alternative
crops, whereas in the summer rainfall area (the north
of New South Wales), barley was an alternative, and
sorghum was an extra crop.
(l) There were big increases in production which further
suppressed local values."
7. In 1969-1970, farmer organizations commenced to agitate for the establishment of boards to handle farmers' products in New South Wales. To constitute a marketing board under the previous Act, it was necessary for at least one hundred producers of a commodity to petition the Governor and for a poll to be taken of all producers of that commodity on the question whether such producers wanted a marketing board for that particular commodity. If more than one half of the votes polled were in favour of the establishment of such a board, the Governor by proclamation would declare that an appropriate board be constituted. In 1970, this procedure led to the constitution of the Sorghum Marketing Board. In 1971, the Oats Marketing Board was established. As has been said, the plaintiff was established on 21 January 1972.

8. Opposition to the establishment of the plaintiff as the marketing board for barley in New South Wales was encountered from Victorian maltsters and other Victorian barley users who had been purchasing barley from New South Wales at prices cheaper than those at which they could obtain barley in Victoria. After the plaintiff was established, Victorian maltsters and other Victorian barley users continued to obtain supplies from New South Wales from outside the board system. They did so in purported reliance upon s.92 of the Constitution.
The Provisions of Part 3 of the Act Relating to Marketing Boards

9. A marketing board may market or arrange for the marketing of the commodity vested in or delivered to it (s.44(1)). A board may establish grades, classes or descriptions of the commodity and fix the terms and conditions of payment under which a grade, class or description of the commodity may be sold by wholesale (s.47). A board may, by order in writing, appoint any person to be an authorized agent to act as the board's agent for the purpose of exercising functions of the board (s.50(1)). If the relevant order so provides, (a) an authorized agent shall be deemed to deliver a portion of the commodity to the board; and (b) the board shall be deemed to accept that portion (s.50(3)). An authorized agent may, pursuant to an agreement with the board, retain such part of the proceeds of the sale by the agent of any commodity as provided in the agreement (s.50(4)). Likewise, a board may, by order in writing, appoint any person to be an authorized buyer (s.51(1)). An authorized buyer is, subject to the order, authorized to purchase, on the authorized buyer's own account, from a producer of the commodity or any other person any of the commodity which that producer or person is entitled to sell (s.51(2)). An authorized buyer may also be an authorized agent (s.51(5)).

10. Where a product has been declared a commodity and a board has been constituted in respect of the commodity, the Governor may, by proclamation,

"(a) declare -
(i) that the commodity shall forthwith, upon the date
of publication of the proclamation in the Gazette
or on and from a later date specified in the
proclamation, or upon fulfilment of such
conditions as are specified in the proclamation,
be divested from the producers thereof and become
absolutely vested in and be the property of the
board; and
(ii) that upon any of the commodity coming into
existence within a time specified in the
proclamation or in any subsequent proclamation
it shall become absolutely vested in and be the
property of the board; and
(b) make such further provision as will enable the board
effectively to obtain possession of the commodity as
owner and to deal with the commodity as may be deemed
necessary or convenient in order to give full effect
to the objects and purposes for which the board is
constituted" (s.56(1)).

Section 56(2) provides:

"Upon the date of publication of the proclamation under
subsection (1), or on and from the date specified in the
proclamation, or upon fulfilment of the conditions specified
in the proclamation, as the case may require, the commodity
is absolutely vested in and is the property of the board."

Section 56(4) provides:

"Any of the commodity vested in a board by the
operation of subsection (2) or (3) and accepted by the board
is so vested freed from all mortgages, charges, liens,
pledges, interests and trusts affecting it, and the rights
and interests of every person in the commodity are converted
into a claim for payment for the commodity so accepted."

11. The commodity vested in the plaintiff by s.56(2) shall be delivered by the producers to the plaintiff, or an authorized agent or authorized buyer, at or within such times, at such places and in such manner as the plaintiff may by public notice or in a particular case in writing direct, or as may be prescribed by regulation (s.60(1)). A producer who supplies, sells or delivers any of the commodity vested in the plaintiff to a person other than the plaintiff, or an authorized agent or authorized buyer, is guilty of an offence (s.60(2)).

12. A board may exempt (either generally or in any particular case or class of cases) from the operation of s.56:
(a) small producers; (b) sales of the commodity direct from producers to consumers,

processors, merchants or retail vendors;
(c) such portion of the commodity as the producer may require
for the producer's own needs; and
(d) such other sales and purchases or receipts of the commodity
as may be prescribed (s.57(1)).

Section 58 provides:

"(1) Every contract, whether made before or after the
commencement of this section, or provision in any such
contract, so far as it relates to the sale of a commodity
the subject of a proclamation under section 56(1) whether or
not the commodity has come into existence when the contract
was made, is and shall be deemed to have been void and of no
effect as from the date upon which the contract was made.
(2) Any provision in a contract, being a provision
referred to in subsection (1), shall be deemed to be
severable.
(3) Any transaction or contract with respect to the
commodity which is the subject-matter of any contract or
provision of a contract declared by this section to be void
shall also be void and of no effect, and any money paid
pursuant to any such contract or provision or to any such
transaction shall be repayable.
(4) This section does not apply to a contract entered
into by the board or a contract declared by the board to be
a contract to which this section does not apply."

Some Recent Events

13. The 1983 Act, which came into operation on 1 February 1984, contained no provisions excluding its operation from interstate trade in barley. Nor did the Act contain a specific "reading down" provision designed to ensure the valid operation of the statute in the event that, but for the provision, the operation of the Act might be held to contravene s.92 of the Constitution. Nevertheless, interstate trade in barley, in particular malting grade barley, by producers and other persons continued after 1 February 1984. What is more, it continued after the making of a proclamation by the Governor on 20 November 1985, pursuant to s.56 of the Act, declaring that "upon any of the commodity barley coming into existence within the State of New South Wales between 1st December, 1985, and 30th November, 1995, it shall become absolutely vested in and be the property of The Barley Marketing Board for the State of New South Wales".

14. It seems that the plaintiff permitted the divesting of malting and feed grade barley by granting, pursuant to s.57, exemptions from the operation of s.56 and by appointing persons, pursuant to ss.50(1) and 51(1), as authorized buyers/agents. Once an exemption is obtained by a producer or by an authorized buyer/agent, the barley so exempted may be dealt with in the course of interstate trade otherwise than through the plaintiff. The plaintiff itself sells barley for delivery interstate and overseas, as well as intrastate.

15. Following the decision of this Court in Cole v. Whitfield [1988] HCA 18; (1988) 165 CLR 360 on 2 May 1988, the plaintiff decided later that year that it would no longer permit the divesting of malting grade barley, though feed grade barley would continue to be divested. On or about 23 September 1988 the plaintiff sent a notice to maltsters and brewers that from 1 October 1988 it would not divest malting grade barley. On the same day the plaintiff sent a notice to all registered growers in New South Wales stating:
(a) that from 1 October 1988 the plaintiff would not divest malting

grade barley;

(b) that such decision had been taken to enhance the marketing

of malting grade barley grown in New South Wales in order to
increase the returns to all growers in the State;

(c) that pursuant to ss.60(1) and 138(4)(a) the plaintiff directed

that all barley produced in New South Wales, save that which the
plaintiff divested, be delivered to the plaintiff; and

(d) that it was an offence to sell or produce malting grade barley

other than under the conditions set down by the plaintiff.

16. The notice stated the plaintiff's reasons for its decision not to divest malting grade barley in these terms:

"By way of background to this decision, it should be
noted that in 1987 the Malting and Brewing Industry paid the
same price for Malting Barley as they did in 1980. During
the intervening seven years (with exception of the 1982
drought year, when barley was transported from Western
Australia) the Malting and Brewing Industry paid at/or below
this price. The main reason(s) for these prices being kept
so low, (were) (1) the purchasing of barley across borders
by some Maltsters, (2) the depressed world grain prices
caused by other producing Countries heavily subsidising
production and sales. Some Growers also took a short term
industry outlook by accepting offers at harvest time, which,
until recently, gave the consumers a cheaper landed price.
On the other hand the Malting and Brewing Industry has
been progressively demanding a higher quality specification.
The result of this squeeze, between static prices and
higher quality requirements, has been the swing by growers
towards higher yielding feed varieties away from the malting
varieties.
In order to put value back into the growing of Malting
Barley and so encourage higher plantings of malting
varieties, the Board believes that single desk selling is in
the best interests of growers and the long term viability of
the Malting industry in N.S.W.
The Board will be operating a Pool along traditional
lines. Pool payment levels will be set in mid October.
In addition, for Malting Barley, "Pool-Ex-Farm" can be
arranged through the Board's Regional Office. This system
is contingent upon available storage space at the end user
and availability of carriers. These deliveries are subject
to quality final at destination including variety purity
and pesticide residues. Crop samples must be submitted for
assessment to Regional Managers for physical characteristics
and pre-testing by the buyer, before delivery."

17. At or about the same time the plaintiff sent a notice to the 167 authorized buyers/agents which it had appointed under ss.50(1) and 51(1), of which 149 were located in New South Wales, ten in Victoria and eight in Queensland. This notice stated that the plaintiff had decided that it would not divest malting grade barley from 1 October 1988 and that feed grade barley would readily be exempted by the plaintiff for all forms of trade upon application by the producer to the plaintiff. The notice stated that this decision had been taken to enhance the marketing of malting grade barley grown in New South Wales in order to increase the returns to all growers across the State. It went on to say that the plaintiff would lay claim to all malting grade barley produced and traded and that it would be an offence to purchase or sell all such barley other than under the conditions set down by the plaintiff. This notice also stated that for any contracts entered into by agents or any traders on behalf of brewers and maltsters with growers to produce Clipper malting grade barley (and/or any other variety) in New South Wales for the 1988/89 season for delivery interstate:

(a) the plaintiff would offer to convert these contracts to a
grower/buyer arrangement;
(b) tonnages, growers' liability to supply and agents' (if any)
obligations to store and/or arrange trucking would be
preserved; and
(c) the plaintiff would pay the growers on the basis of: (i) Pool

delivered to the storage nominated in contract; (ii) Pool ex farm direct to end user; (iii) premium above Pool for Clipper variety barley.

18. On or about 29 September the plaintiff published a public notice referring to the proclamation dated 20 November 1985 and requested and directed that all malting grade barley coming into existence from 1 October 1988 was to be delivered to the plaintiff.
Policy and Functions of the Plaintiff

19. The maximization of returns to all New South Wales growers, given all the market forces, is a paramount policy objective of the plaintiff. The plaintiff was set up by the growers at the request of the growers and funded by the growers for the benefit of all growers. There are approximately 7,300 barley growers registered with the plaintiff. The only payment collected from growers is the sum of $1.00 per tonne collected through the authorized buyer/agent system upon the exempting of feed grade barley.

20. The market for the plaintiff's barley consists of three principal sectors: the malting and brewing industry; the stockfeed industry; and the export trade. Increase in production has resulted in a need to export the surplus of supply over local demand. The plaintiff has established a floor price in the market based chiefly on export value and has accumulated the production of individual growers into marketable quantities for the domestic malting and brewing industry and for export.

21. There are three statutory authorities marketing barley apart from the plaintiff. They are the Queensland Barley Marketing Board, the Australian Barley Board (which has been set up by the States of South Australia - the largest producer of barley of the Australian States - and Victoria) and the Grain Pool of Western Australia. They rarely compete for export business.

22. The bulk of the barley acquired and dealt with by the plaintiff is of malting and manufacturing grade, this being a higher grade than feed barley. But from time to time barley which would comply with malting grade specification is sold direct or through the authorized buyer/agent system as feed grade barley.

23. The plaintiff makes a first advance payment to growers at harvest time based upon an amount being approximately 90 per cent of the expected proceeds of sale. This payment is made to the grower within fourteen days of the delivery of his or her grain to the local silo. As sales are made, the proceeds are applied in repaying moneys borrowed to fund the advance payment. From surplus proceeds, further payments are made to growers, generally in the following July or August and then in December or January.
The Facts of This Case

24. On or about 18 November 1988 the first and second defendants entered into a contract with the third defendant which owns and operates a malthouse in Wendouree in the State of Victoria. By that contract the first and second defendants agreed to sell and the third defendant agreed to buy all the barley (being of malting grade) which was then growing at the first and second defendants' property, "Telephone Gate", at Jerilderie in the State of New South Wales upon the terms and conditions set out in the contract. It was agreed that 400 tonnes of Schooner malting grade barley would be bought and sold at a guaranteed minimum price of $167 per tonne, delivery to be made by the sellers at the buyer's malthouse prior to 31 May 1989. The contract provided for the payment of a deposit of $1,000.

25. On or about 4 December 1988 the plaintiff ascertained that the first and second defendants had commenced harvesting their crop of barley at the property on or about 19 November and that approximately 400 tonnes had been harvested and were being retained in storage on the property. Samples of the crop were tested by the plaintiff and found to meet malting grade barley specifications. On 6 December the plaintiff commenced proceedings in the Administrative Law Division of the Supreme Court of New South Wales against the three defendants and sought and obtained an ex parte injunction restraining the first and second defendants from selling, disposing of, charging or otherwise encumbering or dealing with all malting grade barley then held in storage at "Telephone Gate" and the sum of $1,000 which had been paid by the third defendant to the first and second defendants on or about 18 November 1988. The injunctions were continued by consent on 12 December 1988. On 23 May 1989 the injunctions were vacated by consent upon terms that the third defendant would pay to the plaintiff $205 per tonne for the barley to be delivered under the contract plus interest calculated at $4.50 per tonne and that the plaintiff would pay to the first and second defendants the first pool advance.

26. In the proceedings in the Supreme Court the plaintiff claimed a declaration that

"pursuant to s58(1) of the Marketing of Primary Products
Act, 1983 (NSW) as amended, that the contract between the
First and Second Defendants, and the Third Defendant dated
18th November, 1988 is and shall be deemed to have been
void and of no effect as and from the date upon which that
Contract was made"

as well as other relief. The defendants' defence to their claim is that ss.56 and 58 of the Act contravene s.92 of the Constitution. The proceedings were removed into this Court by order made under s.40(1) of the Judiciary Act 1903 (Cth).

27. The Chief Justice then stated a case referring the following questions to the Full Court for its determination:

"(a) Are any of the following provisions invalid and void
in their application to the trade or commerce of the
defendants, or any of the defendants in that they are
contrary to Section 92 of the Constitution:
(i) Section 56 of the Marketing of Primary Products
Act 1983 (NSW) (as amended) or
(ii) Section 58 of the Marketing of Primary Products
Act 1983 (NSW) (as amended)?
(b) Is the proclamation of the Governor of New South Wales
made pursuant to the Marketing of Primary Products Act
and signed and sealed at Sydney on 20 November, 1985
invalid and void in its application to the trade and
commerce of the defendants, or any of the defendants,
in that it is contrary to Section 92 of the
Constitution?"

Marketing Schemes in light of Cole v. Whitfield

28. The defendants take Cole v. Whitfield as the foundation of their argument and contend that the Act is protectionist and discriminatory in the sense explained in the judgment of the Court in that case. The defendants point out that the decision did not touch the validity of marketing schemes and that the issue for decision here is therefore unresolved by the principles enunciated on that occasion. Furthermore, the defendants argue that the Act is inconsistent with earlier decisions of the Court in Peanut Board v. Rockhampton Harbour Board [1933] HCA 11; (1933) 48 CLR 266 ("the Peanut Case"); North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of New South Wales [1975] HCA 45; (1975) 134 CLR 559; and Australian Coarse Grains Pool Pty. Ltd. v. Barley Marketing Board [1985] HCA 38; (1985) 157 CLR 605. The answer of the plaintiff and of the intervening States is that such burdens as the Act imposes are neither discriminatory nor protectionist and that any burden on interstate trade flowing from the operation of the Act is incidental to the attainment of a non-protectionist object and is not disproportionate to the attainment of that object. The parties supporting the validity of the Act submit that such burdens as the Act imposes are imposed on relevant trade and commerce generally and that any benefit conferred by the Act upon New South Wales producers is not conferred at the expense of producers in other States.

29. Cole v. Whitfield decided that the freedom of interstate trade and commerce guaranteed by s.92 is freedom from imposition on that trade and commerce of discriminatory burdens of a protectionist kind: see pp 394, 398, 407-408. A law will discriminate in the relevant sense against interstate trade or commerce "if the law on its face subjects that trade or commerce to a disability or disadvantage or if the factual operation of the law produces such a result": at p 399. With reference to an impugned State law, the Court observed (at p 408):

"If it applies to all trade and commerce, interstate and
intrastate alike, it is less likely to be protectionist than
if there is discrimination appearing on the face of the law.
But where the law in effect, if not in form, discriminates
in favour of intrastate trade, it will nevertheless offend
against s.92 if the discrimination is of a protectionist
character. A law which has as its real object the
prescription of a standard for a product or a service or a
norm of commercial conduct will not ordinarily be grounded
in protectionism and will not be prohibited by s.92. But
if a law, which may be otherwise justified by reference to
an object which is not protectionist, discriminates against
interstate trade or commerce in pursuit of that object
in a way or to an extent which warrants characterization
of the law as protectionist, a court will be justified in
concluding that it nonetheless offends s.92."

30. The Court identified five means by which discriminatory burdens of a protectionist kind have been imposed on interstate trade and commerce according to past experience:

"tariffs that increase the price of foreign goods,
non-tariff barriers such as quotas on imports, differential
railway rates, subsidies on goods produced and
discriminatory burdens on dealings with imports" (at p 393).

But the Court recognized that these traditional examples of protection of domestic industry are by no means exclusive or comprehensive, the means by which domestic industry or trade can be advantaged or protected being legion: at pp 408-409. We noted (at p 409) that "acquisition of a commodity may still involve the potential for conflict with s.92".

31. Marketing schemes have often come into conflict with s.92. The potential for that conflict arose whenever a marketing scheme touched interstate trade and commerce. Thus an attempt by a State to impose restrictive quotas on sales of South Australian dried fruits in Australia, which drew no distinction between interstate and intrastate sales, was held to be invalid because it restricted interstate sales: James v. South Australia (1927) 40 CLR 1. A joint Commonwealth and State attempt to achieve the same result was likewise held to be invalid: James v. Commonwealth of Australia (1936) AC 578. The same fate attended endeavours by a State to set up marketing schemes by vesting in a board the whole of a commodity produced or grown in the State: James v. Cowan (1932) AC 542; the Peanut Case. These schemes failed because they compelled the producer to dispose of his product to the authority and it acquired that product as and when the product came into existence in order to ensure that the producer should not exercise his former freedom of selling the product by an ordinary transaction whether in interstate or intrastate trade: see the discussion by Dixon J. in the Peanut Case, at pp 286-288. As his Honour noted (at pp 286-287), according to received doctrine at that time:

"Restraints and impediments are forbidden although they
do not discriminate between inter-State and intra-State
commerce, but affect trade, commerce and intercourse
uniformly."

Later attempts by a State to compel persons importing fish from interstate to sell through a market or board were held not to apply to the interstate trade in fish: see Cam & Sons Pty. Ltd. v. The Chief Secretary of New South Wales [1951] HCA 59; (1951) 84 CLR 442; Fish Board v. Paradiso [1956] HCA 60; (1956) 95 CLR 443.

32. The introduction into marketing legislation of a provision excepting interstate trade from its operation or of a reading down provision proved to be a way around the problem exposed by the earlier cases: see Matthews v. Chicory Marketing Board (Vict.) [1938] HCA 38; (1938) 60 CLR 263. But the consequence was that the validity of marketing schemes was achieved at the price of leaving the producer free to dispose of his or her product interstate. The necessity of conceding this freedom to the producer made it extremely difficult to set up an effective marketing scheme in relation to a commodity freely traded interstate, at least a marketing scheme under which the entire commodity produced in the State is vested in the authority: see Wilcox Mofflin Ltd. v. New South Wales [1952] HCA 17; (1952) 85 CLR 488.

33. The decisions to which we have referred proceeded according to the so-called "individual rights" theory of s.92, namely, that the section guarantees the right of the individual to engage in interstate trade and commerce. That view of s.92 prevailed until it was displaced by Cole v. Whitfield where it was pointed out that the "individual rights" theory had the effect of transforming s.92 into a source of discriminatory protectionism in reverse: "in some circumstances a source of privileged and preferential treatment for (interstate) trade to the detriment of the local trade" (at p 403). Once that view was displaced by the interpretation adopted in Cole v. Whitfield, it necessarily followed that the authority of earlier decisions of the Court, including the Peanut Case, North Eastern Dairy and Coarse Grains, was open to question to the extent to which those decisions were decided by reference to an interpretation of the section that could no longer be supported.

34. Accordingly, there is no force in the defendants' contention that the present case is governed by the Peanut Case. Just as the entire crop within the State was vested in the Board in that case, so it is here. But the Court's conclusion that the vesting of the crop in the Board contravened s.92 rested on the individual rights theory and the deprivation of the Queensland growers' freedom to sell their peanuts in the course of interstate trade, not on the concept of discrimination. So, the Peanut Case has nothing to say on the critical question whether the legislation here in question is discriminatory in a protectionist sense.
Conclusion

35. In the present case, although the commodity marketing scheme for which the Act provides vests the commodity produced in New South Wales in a board, it does not vest in the board so much of the commodity as is imported from other States. In this respect, the marketing scheme, as it applies to barley under the Act, must be distinguished from the legislative arrangements considered in North Eastern Dairy, where interstate milk, as well as milk produced within the State, was vested in the Authority and there was a prohibition imposed on the sale of "pasteurized milk for human consumption or use by man in New South Wales" unless it was pasteurized in the State. These provisions were held to contravene s.92 in that they imposed a direct and impermissible burden on interstate trade and discriminated against Victorian milk producers by preventing the sale in New South Wales of Victorian milk on impermissible grounds: see at pp 579-580, 608. But this aspect of the decision, which alone has no relevance for present purposes, was based on legislative provisions which have no parallel in the provisions of the Act.

36. The principal argument presented by the first and second defendants in support of their case of discrimination is that legislation creating a marketing scheme which seeks to ensure a minimum price for producers is necessarily protectionist. This is because it protects small producers by giving them the benefit of the marketing authority's increased bargaining power against large purchasers, especially interstate maltsters, the purchase of malting grade barley across State borders being one of the reasons why barley prices were kept low, according to the plaintiff's notice stating its reasons for divesting malting grade barley. But this element of "protection" in favour of growers, especially small growers, is not accompanied by any element of discrimination against the interstate trade in barley or interstate traders in that commodity. The scheme may terminate an advantage formerly enjoyed by New South Wales border growers but that is not to the point. The curious consequence of establishing a New South Wales minimum price for malting grade barley (which is a higher price in virtue of the plaintiff's increased bargaining power than it would otherwise be) is that it might well enhance the competitive selling position of growers outside New South Wales. In so far as the marketing scheme terminates an advantage in the form of lower prices obtainable by Victorian maltsters from New South Wales border growers - this being an avowed object of the divesting of malting grade barley - those maltsters may now pay more than they did when they purchased from border growers in that State, but they are treated equally with maltsters in that State. In-State and out-of-State maltsters must buy from the plaintiff if they wish to make purchases of barley produced in New South Wales. Accordingly, there is no discrimination against the out-of-State maltster.

37. Another variation of this argument is that, apart from the factors already mentioned, the New South Wales maltsters are free to buy malting grade barley from border growers in Victoria whereas Victorian maltsters are no longer able to buy from border growers in New South Wales. But, for reasons already explained, this involves no discrimination in any relevant sense. The purchasing entitlements of the maltsters in each of the two States are identical. Both Victorian and New South Wales maltsters have equal access to the barley sold by Victorian growers and that sold by the plaintiff. The maltsters in both States are denied direct access to the growers in New South Wales. The Act does not result in the exclusion of one group but not the other from any market; nor does the Act lead to any difference in price of product to maltsters in the two States. Consequently the New South Wales maltster is given no competitive advantage over his Victorian counterpart. So the operation of the Act does not result in "a departure from equality of treatment" of interstate and intrastate trade and commerce, that being the object of the constitutional injunction in s.92: Cole v. Whitfield, at p 399.

38. In argument reference was made to decisions of the Supreme Court of the United States on the commerce clause. The Solicitor-General for South Australia pointed to cases in which legislation fixing minimum prices or setting up a marketing scheme with the object of setting minimum prices was held to be valid on the ground that it did not discriminate against interstate producers or consumers: see Parker v. Brown [1943] USSC 8; (1943) 317 US 341; Cities Service Co. v. Peerless Co. (1950) 340 US 179. On the other hand, the defendants rely upon decisions which invalidate legislative restrictions designed to protect local economic interests, such as supply for local consumption and limitation of competition and conservation of scarce resources for in-State interests in preference to out-of-State interests. So, in Hood & Sons v. Du Mond [1949] USSC 40; (1949) 336 US 525 a milk distributor was denied a licence for an additional plant for the purpose of enabling the distributor to export more milk from the State of New York. The denial was held to be unconstitutional because it inhibited free competition and restricted access to markets: see p 539. Likewise, in Philadelphia v. New Jersey [1978] USSC 131; (1978) 437 US 617, a New Jersey statute which prohibited the importation of most solid or liquid waste which originated or was collected outside the State was held to violate the commerce clause because it was designed to exclude out-of-State waste from local landfill sites. The United States decisions provide limited assistance. That is because some of them proceed according to the view that the object of the commerce clause was to bring into existence a free market economy or a free trade area in the sense that restrictions on competition are unconstitutional. That interpretation of the commerce clause gives it a more wide-ranging operation than Cole v. Whitfield accords to s.92 with its guarantee of freedom from discriminatory burdens of a protectionist kind.

39. At the same time it could scarcely be denied that a prohibition or restriction upon the export of a commodity from a State with a view to conferring an advantage or benefit on producers within the State over out-of-State producers would amount to discrimination in a protectionist sense. If a State having a scarce resource or the most inexpensive supplies of a raw material needed for a manufacturing operation prohibited the export of material from that resource or those supplies in order to confer a benefit on its domestic manufacturers as against their out-of-state competitors, that prohibition would discriminate against interstate trade and commerce in a protectionist sense. However, in the present case, there is no evidence to suggest that the marketing scheme operates in such a way as to restrict the supply of barley to interstate maltsters. They are able to compete on an even footing with domestic maltsters in purchasing malting grade barley from the plaintiff.

40. In this respect it is necessary to elucidate something that was said in Cole v. Whitfield by way of identifying the protection which s.92 is designed to confer. The Court said:

"we must say something about the resolution of cases in
which no impermissible purpose appears on the face of the
impugned law, but its effect is discriminatory in that it
discriminates against interstate trade and commerce and
thereby protects intrastate trade and commerce of the same
kind" (emphasis added) (at p 407; see also p 394).

Plainly enough, mischief at which the section is directed embraces discrimination against out-of-State producers and traders achieved by restrictions upon commodities or services upon which those producers and traders rely in competing with in-State producers and traders in trade or commerce of the same kind. But the passage cited should not be understood as holding that such discrimination cannot occur where the commodities or services upon which a restriction is imposed are not the particular commodities or services which are affected by discrimination. In such a case, the relevant discrimination is to be found by comparison between in-State trade or commerce and out-of-State trade or commerce of the same kind, the restrictions imposed on commodities or services which result in differential treatment of in-State and out-of-State trade or commerce being the means by which that discrimination is created. So much was recognized in Castlemaine Tooheys Ltd. v. South Australia [1990] HCA 1; (1990) 64 ALJR 145; 90 ALR 371 where a law which imposed restrictions on the use of non-refillable bottles was held to discriminate against the out-of-State trade in bottled beer and to confer protection on the domestic brewers of bottled beer. It happened to be the case in Cole v. Whitfield that the commodity upon which restrictions were imposed, namely, crayfish, was the same as the commodity, the out-of-State trade and commerce in which was said to have been discriminated against in a protectionist sense. And that was also the case in Bath v. Alston Holdings Pty. Ltd. [1988] HCA 27; (1988) 165 CLR 411 where restrictions were imposed on tobacco and tobacco products. It was the in-State trade or commerce in these commodities which was held by the majority to benefit from discrimination in a protectionist sense against out-of-State trade or commerce in commodities of the same kind, contrary to s.92.

41. In the result the barley marketing scheme set up by and under the Act does not impose a discriminatory burden of a protectionist kind and, accordingly, it does not contravene s.92.

42. The questions in the case stated should be answered (a) No; (b) No.

ORDER

Answer the questions in the case stated as follows:
(a) Are any of the following provisions invalid and void in their

application to the trade or commerce of the defendants, or any of the defendants, in that they are contrary to Section 92 of the Constitution.

(i) Section 56 of the Marketing of Primary Products Act 1983
(N.S.W.) (as amended) or
(ii) Section 58 of the Marketing of Primary Products Act 1983
(N.S.W.) (as amended)?

Answer: No. (b) Is the proclamation of the Governor of New South Wales made pursuant to the Marketing of Primary Products ACt 1983 (N.S.W.) and signed and sealed at Sydney on 20 November 1985 invalid and void in its application to the trade and commerce of the defendants, or any of the defendants, in that it is contrary to Section 92 of the Constitution?