#7315 - Freedom Of Interstate Commerce - Federal Constitutional Law

Bank of NSW v Commonwealth (Bank Nationalisation Case) (1948) 76 CLR 1

Facts: The Banking Act envisaged progressive exclusion of private banks from banking business. The HCA held 4:2 that this was incompatible with the “freedom” to conduct such business intestate”. The result was a high point in the ‘individual rights’ approach to s 92.

Rich and Williams JJ remarked that the freedom guaranteed by s 92 is a “personal right, not a property right” (Isaacs J in James v Cowan [1930]). They cited a number of opinions in support, one of which was Dixon J in O Gilpin v Comm. For Road and Transport and Tramways [1935] saying “The object of s 92 is to enable individuals to conduct their commercial dealings and their personal intercourse with one another independently of State boundaries”

The CTH appealed this to the PC through s 74 since s 92 did not involve a question as to distribution of powers between States. The PC decided that the issue on s 92 would lead to the discussion of inter se questions but expressed their opinion in dicta on the basis that the issue could come back before the court and also because it proceeded on a misconception of previous cases decided by the PC on the same issue.

Commonwealth v Bank of New South Wales (Bank Nationalisation Case) [1950] AC 235

Lord Porter(for their Lordships) noted at the outset that banking was clearly a part of trade, commerce and intercourse and hence within s 92 (noting previous rejection of the argument that the section was restricted to things carried by land or sea. He then turned to the question of whether the Act offended the section.

• His lordship began by noting that s 92, while it does not create juristic rights – does give a citizen the right to call on judicial power to resist action which offends the section (hence it is a personal right)

• Their honours noted the distinction between measures which are “regulatory” that are not invalid under the section, and “more than regulatory” which are

  • They furthermore disavowed any suggestion that regulation is contrary to “freedom”(just as freedom doesn’t mean anarchy) – it must involve some qualification

  • They noted the difficulty in defining the qualification precisely but laid down two general propositions which would often involve more of a policy decision but was still a legal Q:

1. Regulation of trade, commerce and intercourse among the states is compatible with absolute freedom

2. S 92 is only violated when a legislative/executive act operates to restrict trade, commerce and intercourse directly and immediately as distinct from indirect or consequential impediments that can be regarded as remote

   • They cited Dixon J in the Milk Case in support who reached the same conclusion and went further – “a law which is “directed against” inter-State trade and commerce is invalid. Such a law dose not regulate such trade, it merely prevents it”, but a law as to the manner in which trade is conducted is not a mere prohibition and may not be invalid

• As such the Act in this case, envisaging the complete exclusion from trade and commerce of persons, was invalid

• However their honours qualified this by noting in some instances a monopoly may be the only practical and reasonable manner of regulation and hence inter-state trade, commerce and intercourse thus prohibited and monopolized would remain absolutely free

• There honours then addressed the argument that if this were true lunatics/infants/bankrupts could trade, people could freely trade noxious drugs etc. By noting that regulation of trade can clearly take the form of denying activities to protect citizens – a question of fact and degree is involve

  • Such a difficulty also arises in distinguishing between a “direct” effect from a “remote” one (and it was attempted to be resolved by resorting to phrases like “pith and substance”) – but at least by following two tests – looking to direct/remote and regulatory/prohibition, the inquiry is narrowed.

Cole v Whitfield (1988) 165 CLR 360

Facts: In this case much of the existing case law on s 92 was thrown away and a new approach laid down.

The Sea Fisheries Regulations made under the Sea Fisheries Act prohibiting the sale/possession of crayfish less then carapace length to maintain a breeding stock for a stable population. Similar restrictions were placed in SA but different breeding requirements meant that the crayfish could be caught younger and hence had a smaller minimum size.

Whitfield imported SA Crayfish to TAS above the SA minimum but below the TAS minimum – he was prosecuted for having them but pleaded that the regulations were invalid by s 92.

Held: The regulation did not infringe s 92

The Court began by remarking that s 92 had never had a settled interpretation and the closest that such an interpretation got was concerned with the structure of the law rather than its effect. Accordingly the made a fresh attempt o ascertains its meaning by looking at the Convention Debates.

The Debates (subheadings added)

• Their honours noted that the debates could be used, not for substituting meaning for clear wards but to identify the contemporary meaning of the language used, the subject it was directed at and the nature and objectives of the movement towards federation from which the Constitution emerged

• Their honours noted that the genesis of the section came during a time where a solution to a contested debate on uniform tariffs to establish free trade

  • In passing their honours noted that the word ‘intercourse’ was added distinctly from trade and commerce and thus does not suffer the exact same interpretation – absolutely free trade and commerce and absolutely free intercourse were distinct things

• Their honours noted the discussions that occurred between Griffith and Isaacs (which evidenced that there was no precise settled content to the section) revolved around the ambit of the meaning of ‘absolutely free trade and intercourse’

  • The worries expressed included that it would interfere with internal regulation of trade by licenses (Griffith) and allow diseased vines to cross borders

• Accordingly an amendment was suggested which would narrow the meaning of the words lest the wider words prohibited local licensing provisions that were reasonable regulations of trade within the states and territories (Quick)

  • However the rhetoric of the provision (acknowledged by Barton to be the “language of three lawyers”) was so strong that it passed into the Constitution completely unchanged

• Their honours commented that that the clause was intended to eliminate border customs is undoubted but whether it might create other immunities, though foreseen, there is no suggestion that it was intended to prevent enactment of regulations “necessary for the conduct of business (Parkes)

Hence the conventions did not define what regulations were to be permitted and what forbidden – aside from a variation of the introductory words the provision was completely adopted without further elucidation fo any consequences. The precise scope of the guarantee was left as a task for the future.

Hence the Court went on. They proceeded to say that the purpose of the law was clear from its history – to create a CTH free trade area and to deny the CTH and Statse from preventing or obstructing trade between States. Further, as a compliment to this power, ss 99 and 102 were introduced to prohibit preferences.

Their honours noted that it was no surprise that the section was confusing and would produce a variety of propositions (using the law student giving up example) given the absence of words of limitation. They then went on to define the meaning of “free trade”- absence of protection – and said that s 92, 99 and 102 were all enacted for the purposes of giving effect to it.

They then went on to note the two possible arguments which could be levelled to give the section a wider import than history suggests

1. The word ‘intercourse’ – since ‘absolute freedom of intercourse’ would mean unhindered passing between states if it is to have any substantial content. Accordingly the attachment of this to the guarantee as to trade and commerce would suggest they are equally without restriction

   1. But even movement across borders has to be possible to some extent – e.g. restricting pedestrian use of highways or authorize arrest of a fugitive moving between States

   2. Hence much depends on form and circumstance of the intercourse - but it is clear that if the immunity given to some forms of intercourse is given to trade and commerce anarchy would result

   3. Once this is accepted there isn’t any reason for insisting on strict correspondence between freedom of interstate intercourse and interstate trade and commerce

2. The words ‘absolutely free’

   1. The same applies to the words “absolutely free” – it would be equally inconsistent with any interpretation of the section that concedes interstate commerce than a freedom from all burdens.

   2. Implicit in this recognition that ‘absolutely free’ cannot be read as permitting anarchy is the need to identify classes of burdens from which absolute freedom is guaranteed

      1. But the absence of any definition was to do with political expediency and not a purpose of prohibiting all legal burdens

      2. Hence in this context to construe s 92 as requiring that interstate trade and commerce be immune only from discriminatory burdens of a protectionist kind doesn’t involve an inconsistency with the words ‘...