BUTTER TEST CASE

Dominion, Volume 10, Issue 2924, 9 November 1916, Page 6

BUTTER TEST CASE

JUDGES' DECISIONS MAJORITY HOLD SCHEME TO BE VALID CHIEF JUSTICE DIFFERS

Yesterday morning Their Honours the Chief Justice (Sir Hobert Stout), .Mr. Justice Edwards, and Mr. Justice Chapman delivered their judgments in | tlio action taken to tost the question of tho validity of the Order-iii-Council under which the Government recently launched tho Board of Trade's scheme for the regulation of tho price of butter in Now Zealand., The scheme begins with ilie prohibition of the export of all butter and cheese. Then it provides that a right to export may ho obtained by those wiio procure a, license. The export license may be obtained by those factories which agreo to pay a charge at the rate of -;jd. per lb. of butter-fat produced by them. The money collected through tho charge is to go into a fund which is to be used mainly to compensate those who, by selling locally, reap a lesser gain than thoso who export. The dairy companies took the action to test tho validity of tho Order, and their main contention was that tho 3d. charged is a tax, that Parliament had not given the Executive express power to levy this "tax," and that in Parliament alono rested the power to tax. Tho Crown ; argued that the charge was not a tax, but a condition upon complying with which tho factories would obtain an export license. The Solici-tor-General (Mr. J. AV. Salmond) appeared for tho Crown, and Mr. M. Myers for the dairy companies. The companies whoso names appeared on

tho originating summons were the Taratahi Company (near Carterton) and the Mangoroi Company (Taranaki). MR. JUSTICE EDWARDS'S JUDGMENT. THE. GROUNDWORK CLEARLY TRACED. In the first of the two majority judgments, Mr. Justice Edwards gives a review of the circumstances out of which the matter has arisen. Ho then says:"lf this Order-in-Council is valid the result will be that all the manufacturers of butter in New Zealand who elect to como in under the scheme contained in tho Order, whether they sell for homo consumption or for export, will receive tho same net return from each pound of their produce, and they will all contribute towards tho cost of administering the system the same sum per pound of their produce. If .the moneys received by the licensing authority under tho system are moro than sufficient for the purposes last mentioned, the resi-

due of such moneys is to bo distributed among the payers of the charge, including the cheese manufacturers. I may add that the first Order-in-Coun-cil, which fixes a maximum price for butter sokf for local consumption will leare to the manufacturers the benefit of the enhanced war prices to a very considerable extent, and that the system embodied in the- Order-in-Coun-cil, while preventing the price of butter in the local market from rising still higher, will neither diminish nor delay the export of butter to the English consumer. It has boon ergued by counsel for the plaintiffs that this system is unfair to the cheeso manufacturers; hut as no maximum price has been fixed for cheeso in Now Zealand, and the cheese manufacturers consequently have the full benefit of tho enhanced war prices, this has not teen mado to appear. It seoms plain that in order to regulate the trade in butter it was necessary to regulate tho trado in butter-fat, and this in effect is what has been done by the Order-in-Council. "Tho. question then is whether or not the modo in which this trade has been regulated by tho Ordors-in-Coun-cil comes within the powers given by the Regulation of Trade audi Commerco Act, 1914, the 24th section of which provides that: 'At all times while His Majesty is at war with any foreign princo or State the powers of the Governor by Order-in-Council, under Section 47 of the Customs Act, 1913, to prohibit the exportation of goods shall extend to any goods tho prohibition of the exportation of which is, in tho opinion of the Governor, necessary in the public interest, and all the provisions of that section and of the said Act shall apply accordingly. (2) Any Order-in-Council made under the autnority of this section Bhall cease to bo_ in force so soon as His Majesty is at peace with all foreign States and princes. The 47th' section of the Customs Act, 1913, provides: 'The Governor may from time to time bv Order-in-Council gazetted prohibit the exportation of any goods' belonging to the five classes therein mentioned. These include—(a) arms, explosives, and military and naval stores, etc. (b) Goods the prohibition of the exportation of which is in tho opinion of the Governor necessary for the preservation of the flora or fauna of Now Zealand; (c) Goods, the prohibition of the export of which is necessary for the protection of tho revenue or tho prevention of fraud or deception; (d) Goods which do not conform to conditions imposed by .any law or'regulation as to purity, eoundness, or freedom from disease; (e) Goods the exportation of which would m the Governor's opinion be a source of danger to life or property at sea.' The second subsection provides that ,'lno power so conferred upon the Governor in Council shall extend to authorise the prohibition of the exportation of goods either generally or to any specified place and either absolutely or so as to allow of the exportation of the, goods subject to any conditions or restrictions.'

Designed to Protect the Public. "It is indisputable that theso two Orders-in-Council embody a system designed to protect tho publio of New Zealand from the exaction by the dairy companies of prices for butter which are only rendered possible by tho continuation of the war at present ragiu<r throughout the world, and at the same time to equitably adjust, as between the different classes Ot manufacturers of buttor and cheese the incidents which necessarily atach to the inauguration of such a system. It must, I think, also be assumed, m view of tho report o£ the Board of Trade and tho absenco of any evidence to the contrary, that the system so embodied is the system.best calculated to carry theso objects into effect. I he question then is whether or not the conditions embodied m the second of theso two Orders-in-Council go neyond tho powers givon to the Govercor-in-Council by the 24th section of tho Regulation of Trade and Commerce Act, 1914 a-nd tho provisions of the Customs' Act, 1913, therein incorporated." "Tho objections raised to the validity of the Order-in-Council were: (I) 1 That tho 2'ltli section of the Regulation of Trade and Commerce Act, 1914 merely extends the powers given to the Governor-in-Couneil by the 47th section of the Customs Act, 1913. The argument upon this point was, in His Honour's opinion, rendered possible only by treating the 24th section of the Trade and Commerce Act as an amendment of tho Customs Act. It was not an amendment. It was a substantive enactment, passed for a widely different purpose of the most transitory character. For all Orders-in-Council

made under tho 21th section of the Act of 1914 will couio to an end when peace is declared; and the power given by the Statute will thereupon fall into abeyanco, only to revive in the ovent of war again breaking out.

The "Taxation" Phase. Tho second objection was that the threo farthings charge was a tax within the meaning of the Petition ot Eight. On this important phase of the case, a phase stressed during the hearing as ono of great public concern, His Honour said: "In considering all the objections mado by counsel for the plaintiffs it is necessary to bear in mind that the power given to the Governor-iiinCouncil by the 24th section of the Act of 1914 is not a mere power to regulate the export of goods under a right which may be regulated 1 , but cannot be taken away, iho power of tho Govemor-in-Council to take the right away absolutely, at his discretion, and subject to no control, is given unequivocally and is admitted by counsel. Coupled with this power thero is power to relax the prohibition so as to allow the exportation of the prohibited goods subject to any conditions or restrictions. Now, if, as is admitted, the power to prohibit the exportation of tho goods is absolute at the discretion of the Governor, it seems to mo of neoessity to follow that the discretion of the Governor as to the conditions or icstrictions upon and subject to which he thinks fit to relax the prohibition must also bo absolute, and beyond control, unless indeed it were plain upon tho face of tho ,Ordor-in-Council that the power had not been exercised in furtherance of the purposo of tho Act which has created it, namely, tho, regulation of trade and commerce in time of w : ar. If it were plain upon the face of tho Order-in-Council that the power was not exercised for that purpose, but was usedl so as in effect to impose an export duty upon the prohibited' goods, so in order to swell the revenue for general purposes, or to provide a fund for any purpose inconsistent with the regulation of trade or commerce, then I should say that it was plain upon the face of the order that the condition was ultra vires and void. Short of this I cannot see upon what principle this Court could inquire into the conditions under which the Governor has determined that the prohibition against exportation shall be relaxed in any case which comes within the enactment. I have already said that in my opinion this Order-in-Coun-cil embodies a system for the regulation of the trade in* the products of butter-fat. If this is so it seems to mo to bo plain that this Court cannot question tho wisdom of the scheme or system which' the Governor in his discretion has adopted in the exercise of the power given to him by the statute If this could be questioned then all that tho Court has before it is tho report or the Board of Trade, and, as I have also already said, I think that in the absence of evidence to the contrary tho Court is bound to assume that the system adopted is the system best calculated to carry its object into effect. If wo were at liberty to prefer our own views upon the subject to'the views of the Governor and tho Board of Trade, I should arrive at tho same conclusion.

Fallacious to Call it Taxation. "It is, I think, a fallacy to call the moneys which tho licensees under the Order-in-Council are called upon to contribute to the fund thereby created a tax or a charge within the meaning m which that word is used in the petition of right. If tho Governor had not the absolute power in his discretion to prohibit the export of butter and cheese, then the system which requires the payments to bo made might not incorrectly lie considered to be a charge obnoxious to tho Petition of Right. So also if it were plain upon tho face of the Order-in-Council that tho payments required to be made were not so required in furtherance of the purpose of the Act, namely tho regulation of trade and commerce.' in the time of war, but were levied merely to swell the revenue for general purposes, or for any purpose not connected with the regulation of trado and commerce. If there were no authority to prohibit the export ot the goods, then plainly the exaction of tho payments would be forbidden by tho Petition of Eight. If the power to forbid the exportation of the goods for tho purpose of regulating trado or commerce were used for purposes plainly foreign to that object, then it could not be said that the power given by tho statute had been exercised. But where, as in the present case,' the power to prohibit the exportation of the goods exists; and coupled with it there is the power to relax tho prohibition upon such conditions as tho Governor thinks fit, and the system comes plainly within the purpose of the Act, it appears to nieto be a fallacy to call a payment whichis necessary to such system, and which is required by tho conditions imposed by the Governor, a tax or charge in the meaning in which that word is used in the Petition of Right. Such payments are, in my opinion, neither a tax nor charge nor a licenso fee. Thoy are contributions lawfully and reasonably required by the conditions to be mado to a fund necessary for tho inauguration of a system for the regulation _of the trado in goods.,tho basis of which is butter-fat. It is said that the pa,y : ments required by the Order-in-Council arc not voluntary. In the viow which 1 take of the case it does not maitter whether they are voluntary or not, but in law it seems to mo that they aro clearly voluntary. The manufacturers of butter and cheese can pleaso themselves as to whether or not they will tnkc advantage of the conditions upon which tho prohibition of the export of their wares is relaxed. If they desiro to tako advantage of theso conditions thoy must enter into a contract to abide by them. No doubt they would very much prefer no to bo bound by the conditions, but it suits the manufacturers to submit to tho conditions in order that thoy may obtain tho privilege, for privilege it is, of exporting their goods. ■ To acquiro the privilego which thoy desiro they agree to bo hound by tho conditions which they dislike. This in law is a voluntary act."

"The third objection was that the money collected would be Crown money, and could only bo disposed of by Parliament in accord with Section 54 of the Constitution Act. His Honourheld the opinion that the money did nob form part of the revenue of the Crown, and section 54 of the Constitution Act dealt only with His Majesty's revenue in New Zealand.

"The fourth objection was that it is beyond tho power of the Govornor-in-Council to delegate* any of the powers given to him by the legislation in question. Though the least relied on, His Honour said, this was the most important objection. However, tho conditions were within tho power given to the Governor-in-Council.

"Order Valid in All Provisions." Tho fifth objection was to the chargo being retrospective. This objection did not appear to have any weight. His Honour said: "That tho Order-in-Council controls the trade in the products of butter-fat. in a manner which would bo impossible apart from tho special legislation is plain. Opinions may differ as to tho wisdom of i such legislation, for it no doubt does interfere with the liberty of the sub- ] jeet to trade as ho pleases. This, however, is by no means without precedent, even with regard to legislation of a permanent character, such as tho Acts which have created tho Arbitration Court, and have given to that Court immonso powers of con-' trol over all traders and manufacturers, and over many others who are neither traders nor manufacturers. "With regard to tho legislation with which wo havo to deal in the present

case, it is to be observed that it is emergency legislation, which takes effect only in the time of war, when the publio safety and the public good supersede for the time being all other considerations. It can therefore have no lasting ill-effect either upon liberty or upon trade. I express no opinion as to the wisdom of this legislation. That question was for Parliament alone. So far as tho Courts aro concerned, it was determined when the Act was passed. Dealing with this case as tho law and tho facts_ aro, these Orders-iri-Council come, in my opinion, within tho power given to the Governor, whose discretion is uncontrolablc. I may bo permitted to add that I can see nothing -unjust, or oppressive, in tho system in which the power given by the statuto has been exer- | cised.

"It is unnecessary to answer seriatim tho thirteen questions put by tho originating summons. Tho answer to tho first of these questions, 'Is tho said 'Order-in-Council valid at all, and if so to what extent?'- should, in my opinion, he: 'The Order-in-Council is valid in ail its provisions.'' This answers all the questions put by tho originating summons. I have considered the question of the costs of tho proceeding. The questions raised aro of considerable importance; they are novel; and it is desirable in the public interest that they should be judicially determined. I think, therefore, that there should be no order as to costs."

[ MR. JUSTICE CHAPMAN. BRITISH EMPIRE'S GREATEST PERIL. In the courso of his judgment, Mr. Justice Chapman said: "Since this caso was argued I have given it my most careful consideration, and the more I consider it the more convinced do I become that when properly regarded it does not really; present any difficulty. It is always incumbent "on a Court [which is called upon to construe_ a statute dealing with a special subject to recall tue_ moment at which it was I passed the circumstances in which the | Legislature passed it, and the exigency which tho Legislature_ had to meet. The circumstances which justified the Legislature in passing the statute \\nd(;r consideration need bo but briefly referred to. On August 5, 1914, tno New Zealand Parliament was in session, but it is usually in recess for half tho year. The whole British Empire on that day knew that it had to face the greatest peril to which it had ever been exposed, and that its whole population would at once be called on to make every possible sacrifice for, the safety of tho State. Parliament then decided to entrust the Government with unusual powers. Within five days four Acts, of wjhich tho one now under consideration is one,' none of which would have been passed but for the

war, were added to tho Statute Book. All of theso either interfered with the rights of the subject or otherwise greatly extended the powers of tho Execntivo rlerhaps to the extent of authorising tho Governor to suspend tho Habeas Corpus Act. It was thus in the light of tho fact that five of tho great Powers of Europe were already at war that the various Legislatures of the Empire, including our own passed emergency Acts, one of which has now to bo considered..

"In construing this Act two leading features have to be borne in mind, namely, first its title, an Act to make provisions for tho regulation of trade and commerce in time of war,' and next, the provision that any Or-der-in-G'omicil made under it remains in . force only until His Majesty is' at peace with all foreign States and princes. Theso features show it to be an emergency Act of exceptional character. Then all its leading provisions are such as could only bo justified by the emergency that had arisen, and among theso is the provision empowering the Governor absolutely to prohibit the exportation of any class of goods and the further provision enabling him to fix the price of commodities.

"To my mind the key to the whole question is to he found in this power to prohibit exportation. AVhen a functionary is 'expressly empowered to do a certain act in itself of a stringent, and, it may ho said, of an oppressive nature, and he is at the same time cm-" powered to do this subject to conditions as to relaxation to he laid down by himself, there is a strong presumption, that ho is thereby empowered to exercise his authority in a less oppressive way if he thinks fit, and that I think is tho real effect of the power conferred on the Governor by this statute.

Not a Tax in any Sense. "In my opiuion the charge raised by this Order-in-.Council is not a tax in any sense. A tax, or, to use the words of the Petition of-Right, a gift, loan, benevolence, tax, or such like charge is an impost whereby the subject is compelled! to contribute a sum of money for tho enrichment of tho Treasury, even though it incidentally effects some economic objeot, while this charge lias no such, character. 1 express no opinion as to whether it would be within the power of the Governor to impose a feo in respect of the issue of the license. The oommon understanding of constitutional lawyers is in a general sense against such a course, and if it could be imposed it would ho revenue which could only he disposed of by Parliament. "A question liko this is not to bo solved by giving the thing referred to a name, but if I were called upon to give tho fund collected under this Order-in-Council a name I should say that it i 6 an ordinary trust fund. Tho sum is colloctod uuder an agreement while tho Order-in-Counoil disposes of every part of it. If tho Order-in-Council were rescinded or tho war ended to-morrow and the fund remained undisposed of this Court would in case of a difficulty arising nave to find as an ordinary matter of judicial business v who were tho owners and in what proportions they owned it." The question as to whether an agreement between tho Crown and -t.il© exporter, made under the Ordcr-in-Council, would be voluntary on the part of the exporter had been raised. His Honour said: "It is to my mind unprofitable to discuss the academic question as to whether a trader can ho said to do a thing voluntarily who may be ruined if he fails to comply. It is sufficient to say that a man who makes an agreement to save himself from great loss and'inconvenienco is acting voluntarily unless there exist some of these circumstances which would induce a Court of Equity to say that it is not binding on him. He is not compelled to pay a sum of money for doing what it is his right to do, but he is complying with a condition in order to acquire a right. "We have to start with the fact that Parliament conferred unrestricted power on tho Governor to prohibit exports. _ Then what is the scheme of relaxation wln'ch has been introduced bv the Order-in-Counoil in the exercise of this power? It is not an impost because nobody need pay it. "I do not consider it necessary to answer the questions put, beyond saying that in my opinion the Order-in- ; Council is in all respects a valid exercise of the Governor's powers, t ngreo . that there should be no costs."

THE CHIEF JUSTICE. "THE CHARGE WITT-TIN THE PETITION OP RIGHT." The Chief Justice, after setting out the case, said: "There seems to mo to be three main questions that arise regarding the validity of this Order-in-Council. First, has the Governor power to make a charge on butter-fat as a condition of

allowing the export of butter > and oheeso? Second, lias the Governor power to delegate the authority—if ho has tho authority—to make such a charge, to tho licensing authority to lis (with the approval of tho Board of Trade) tho amount of the charge? and, third, with reference to the disposal of tho moneys, has tlio Governor power to disposo of moneys that are paid 'to tho Crown' as 'a charge'—and that are received "by tho licensing authority ou 'behalf of the Crown'—by declaring

that part is to be paid for Governmental expenditure part disbursed as benefactions to peoplo who do not export butter or cheese, and part refunded'Ho people who had paid the charge ? "As to the first question, the power relied upon is alleged to be granted by section 24 of the Regulation of Trade and Commerco Act, 1914. Tho title is "An Act to Make Provision for the Regulation of Trade and Commerce in Time of War.' Section 24 simply enlarges the power the Governor had under section 47 of tho Customs Act of

1913. Under that Act, as has been pointed out, tho Governor had power to prohibit the export of five classes of goods. Tho Act then went on to allow him to prohibit their export 'generally or to any specified place,' and 'either absolutely 1 ' or 'subject to any 'conditions or restrictions.' All

that tho 1914 Act does is to _enaet that tho power of prohibiiton is not confined to any class of goods; but is during the time of war applicable to all. ■ It is contended that this scheme in tho Order-in-Council is a condition or condition, to use the phraseology of the 1913 Act. There is no limitation, it is said, of the word 'condition. 1 Therefore His Excellency the Governor I may make any conditions ho pleases, j "It is further to bo noticed that this charge is not made on goods for exportation. The charge is levied on butter-fat, which is never exported; it. is not to be paid on the goods that are exported—butter and cheese. Further, all dairy factories must pay this charge on butter-fat, even though their product is not to bo exported. Thero is that ancient bulwark of British liberties, 'The • Petition of. Right'- (3 Car. I, Cap. 1), which is in force no doubt in the Dominion of New Zealand, so far as it can be applicablo to the Dominion, and that petition contains' these words: 'That -no man hereafter bo compelled to make or yield any gift, loan, benevolence, tax, or such like charge without common consent by Act of Parliament.' The charge that is made in this Order-in-Council has not received the as6ent of Parliament. Had the Parliament power to delegate this legislative function to the Governor? I. am not aware of any such warrant or authority. It cannot leave.the question of taxation to any Government; that would be a violation of constitutional law and procedure. This charge certainly comes within the very words of the Petition of Right: it is a 'gift, loan, benevolence, tax, or such-like charge.' "The undoubted object .of this system is to regulate prices of butter in the interests of the people of the Dominion as a whole, but it provides that the cost of administering tho system is to be paid, not by the people as a whole, but out of a fund created from contributions charged on export license-holders. In fact, as a part of the scheme to fix the pneo of butter, a charge or tax is levied to pay for the scheme. .- . . This is a compulsory gift. No manufacturer of butter or cheese can get his goods exported unless he pays this sum. It is compulsory on him to do so. If he attempts to evade the payment, he is liable to have his goods for-

feited, and ho is also liable to be punished by fine. It is, in my opinion, therefore, entirely incorrect, if not absurd, to say that it is a voluntary payment. ... I cannot gather froir

the use of the word 'conditions' that the mere fact of the State being at war allows us to assume that tho Parliament has abrogated its function of legislating or levying taxes or charges. Some clear and emphatic statement ■would have to 'be produced from some statute before that can be assumed." "Order on All Points Invalid." Discussing tho second question he mentioned, His Honour remarked: "New Zealand has suffered great calamities from the war, hut I do not think that it can be assumed that we have suffered what would bo the greatest calamities to a freo people, namely, the destruction of the safeguards of our liberty that our convictions even for us "through growing trials and tribulations." His Honour added :"No doubt,the licensing authority may have power to perform administrative acts which need not be set out in tho Order-in-Council, but I doubt if it can vary the terms of a license. That would be delegating to the licensing authority legislative authority." As to the third question: "This order, in purporting to deal with public Crown money is invalid. It cannot be called trust money. The Grown cannot hold as a trustee for itself. It is simply nothing else than Crown money,

and the mode of its disposition is stafc* ed in tho Order-in-Council. It certainly would be peculiar if such' a largo sum as at least £300,000 per year is nob controlled by tho Public Rovenucs Act or any other statute." "I am therefore of opinion that pit all points this Order-in-Council is invalid. Regarding somo of the objections to the order, it was said by the Solici-tor-General that if those objections were valid, tho Order-in-Council could bo varied. I do not see what amendment could be made in this order that could make the system valid. The system is, in my opinion, unconstitutional and illegal. If, however, it can bo amended, thero is time enough for tho Court to consider the amendments when they are produced to the Court. I may add that the benefactions .-proposed) to I bo given to those who suffer loss from tho sale of butter in the Dominion is, in my opinion; the disposing of State I moneys for tho benefit of private indiI viduals. This may be a reasonable and proper thing to do. If it is, it must ha done hy Act of Parliament. Crown moneys cannot be disposed of in this way. unless we set asido the custom the New Zealand Parliament lias followed from its inception, and also tho express terms of Section 54 of the Constitution Act."

TALK OF AN APPEAL. Mr. M. Myers, who was counsel for the plaintiffs at tho hearing, stated to the Press after the decisions were given that in all probability an appeal would be lodged. MINISTER'S OPINION "I think the result is very satisfactory," said the Hon. W. D. S. MacDonald, Minister of Commerce, yesterday, referring to the Court's decision. "It would have been'unfortunate if the Order-in-Council had been held to be invalid, as this' would have involved practically the total stoppage of all export until further arrangements could have been made, and owing to the limited shipping accommodation available we don't want to miss a single steamer. I am very glad that export could now. go on as we had planned."