188
The University of Queensland Law Journal, Vol. 9, NO.2
Constitutional Restraints on Trade and Commerce in
Australia and Canada
J.M. HERLIHY*
When the two federations of Canada and Australia were established, it was
understood that thereafter the several provinces or colonies would, within each
federation, constitute one trading area. This understanding of the founders of
both nations has been met within the constitutional framework of both federations, and it is the purpose of this article to examine the different provisions, and
their application, in relation to the concept of freedom of trade within the two
countries.
Freedom of trade will be discussed in the constitutional context, and not in
the sense of freedom from trade restraints. The discussion will relate to the
guaranteed freedom from governmental interference, either National, Provincial or State, given to citizens of both countries by their respective Constitutions.
I shall first discuss Australia.
Under the Constitution of the Commonwealth, powers to legislate over trade
and commerce are distributed between the Commonwealth and State Parliaments. The Federal Parliament has been given power over interstate and foreign
trade and commerce, while the State Parliaments have the residue power to
legislate with respect to intrastate trade activity.'
The Federal power was construed rather narrowly in the early years of
Federation, for example, in the Railway Servants Case,2 the High Court of
Australia stated that the power only authorised laws, the effect of which, upon
interstate and overseas trade was "direct, substantial and proximate".' These, it
is seen, are indefinable words, but as interpreted by the High Court were used to
cut down any wide sweep that may have been given to the Commonwealth under
Section 51(1) of the Constitution.
The above case, however, was virtually overruled in Huddart Parker v. The
Cornm~nwealth,~
and the legislative grant has been more expansively interpreted. To avoid repetition of judicial pronouncements, I need only quote
from a recent decision of the High Court in the case of Airlines of N.S. W. Pty.
Ltd. v. The State of N.S. W. and Commissioner for Motor TransportS where
Barwick C.J. stated as follows:"It remains a power to make laws with respect to Interstate and Foreign trade and
commerce. This Court has never favoured, in relation to Commonwealth power, the
more extensive view of the Commerce power under the Constitution of Congress
which has, at some times, found expressions in decisions of the Supreme Court of the
United States.
To say this, however, is not to deny that there are occasions, and the safety
procedures designed to make Interstate and Foreign Trade and Commerce as carried
* B.A., LL.B. (Qld.); LL.M. (London); Barrister-at-Law; Lecturer in Law, University of
Queensland.
1. Vide S.51 and S.107 of the Commonwealth Constitution.
2. (1906) 4 C.L.R. 488.
3. 1bid. 545.
4. (1931) 44 C.L.R. 492 particularly the judgment of Dixon J
5. (1965) 38 A.L.J.R. 388.
ConstitutionalRestraints on Trade and Commerce
189
on by air transport secure are a ready instance, when it can be no objection to the
validity of the Commonwealth law that it operates to include in its sweep intrastate
activities. Occasions when, for example, the particular subject matter of the law and
the circumstances surrounding its operation require that if the Commonwealth law is
to be effective as to Interstate or Foreign Trade and Commerce, that law must
operate indifferently over the whole area of the relevant activity whether it be intrastate or interstate but this involves no change in the subject matter of the Commonwealth power. The power is not enlarged by circumstance though what might be
validly done in its exercise may be more extensive because of the factual situation.
Some decisions of the Supreme Court of the United States on close examination really place the matter in relation to the commerce power of the Congress no higher. The
total validity of a law which operates on more than Interstate or Foreign Trade and
Commerce and which is sought to be justified by reference to Section 51(1) of the
Constitution will be determined by resolving the question whether the law as so
operating, is in substance a law with respect to Interstate or Foreign trade.""
Before that in O'Sullivan v. Noarlunga Meat Ltd.' it was held that the power
under Section 51(1) extends to the regulation of goods within a State, if the
goods are to be set aside for export.
These cases have, I hope, given some idea of the intertwined relationship of
Commonwealth and State powers over the subject of Trade and Commerce.
The field is covered legislatively by both Parliaments, and the question has
always been how far the Commonwealth power extends, for what the Commonwealth cannot do (subject to what appears later) under Section Sl(1) must,
by the constitutional framework in Australia, be within the power of the States.
S o far I have mentioned what may be termed the Postive Grants of legislative
power to the respective Australian Parliaments. These are grants which enable
the Commonwealth or States (within their own ambits) to legislate with respect
to Trade and Commerce; but there is another side to the coin, for the Constitution also contains prohibitions on legislative activity.
The Parliaments are either expressly (as in Section 1 16 of the Constitution) or
impliedly for-bidden to legislate over certain fields of activity. One of these
prohibitions covers the Trade and Commerce field.
The article will now move on to discuss that prohbition, and the way in which
Courts have interpreted it since Federation in 1901.
Since Federation some five appeals to the Privy Council and over eighty odd
decisions at the High Court have been reported in which the lucid words (on
their face at least) of Section 92 of the Constitution have been elucidated and
applied. From the figures given just now, one will realise that it would be well
nigh impossible in an article of this sort to outline what, to many, are conflicting
and confusing decisions on the prohibition, so what is hereafter attempted is my
explanation of the cases rather than a statement of' the Law as it has been
declared to be. These are the principles which I have come to see the cases as
deciding.
The statement may appear to be terse in places, but this is done for the sake of
keeping the article in manageable proportions.
First, to quote Section 92 of the Constitution. The essential words are
"Trade, Commerce and Intercourse among the States shall be absolutely free".
Although McArthur's Caseswas the sixth case to come before the High Court
on Section 92, it is, for my purpose, the best beginning. In the joint judgement of
Knox C.J., Isaacs and Starke JJ's it was said:6 . Ibid. at 391 and 392.
7. (1954) 92 C.L.R. 565.
8. (1920) 28 C.L.R. 530.
190
J. M. Herlihy
"The notion of a person or a thing tangible or intangible, moving in some way from
one State to another is no doubt a necessary part of the concept of Trade, Commerce
and Intercourse among the States. But all the commercial dealings and all the accessory methods in fact adopted by Australians to initiate, continue and effectuate the
movement of persons and things from State to State are also parts of the concept
because they are essential for accomplishing the acknowledged end. Commercial
transactions are multi-form and each transaction that is said to be interstate must be
judged by its substantial nature in order to ascertain whether and how far it is, or is
not of the character predi~ated."~
This pronouncement squarely poses some of the main issues which must be
faced when endeavouring to interpret Section 92. Three essential matters are
raised in the above passage. They are:(a) The use of the phrase "Trade, Commerce and Intercourse among the
States";
(b) by what activities does a person engage in interstate Trade, Commerce and
Intercourse?
(c) when does a law come within the prohibition imposed by Section 92?
I shall briefly discuss each of these questions in turn.
First, to the meaning of the phrase, "Trade, Commerce and Intercourse
among the States". To go to the words "among the States"; this description
denotes a connection with two or more States of the Commonwealth. Another
essential quality denoted by these words arises out of the use of the word
"among". This word connotes mutuality. So, Trade, Commerce and Intercourse, cannot be described as "among the States" unless it brings one State
into relationship with another. This mutual relationship it seems, can only be
created by the movement of a thing from one State to another so, therefore,
movement from one State to another State becomes an essential quality of the
phenomenon on interstate Trade, Commerce and Intercourse.
This concept of mutuality is brought out in the Hospital Provident Fund
Case,'' where movement among the States was lacking. Interstate Trade, Commerce and Intercourse includes the movement of both tangibles and intangibles.
In the Bank Nationalisation Case, in the High Court," and the Privy Council,12
it was held that the movement of credit from one State to another was a form of
interstate Trade, Commerce and Intercourse. A thing then, is not in the course
of interstate Trade, Commerce and Intercourse unless it, itself, is moving from
one State to another.
Now, to the meaning of Trade, Commerce and Intercourse. The movement
per se of things between States is not protected by Section 92, but if movement
in the course of trade (in the widest sense) is to fulfil that description, the movement must have a purpose capable of giving the movement the complexion of
Trade, Commerce and Intercourse.
Purposeless (in the sense of non-trade purpose) movement of a thing into
another State, as occurred in the case of Harris and Wagner," where sheep were
moved from Queensland into New South Wales merely for the purpose of
evading the State Transport Act of Queensland, will not constitute trade among
the States. The movement must be for a purpose which can clearly be
categorised as Trade, Commerce and Intercourse.
9. Ibid. 549.
10. 87 C.L.R. 1 at 14-15 in the judgment of Dixon C.J.
11. 76 C.L.R. 1.
12. 79 C.L.R. 497.
13. 103 C.L.R. 452.
Constitutional Restraints on Trade and Commerce
191
S o far then, Section 92 requires purposeful movement among the States.
Now to move onto matter (b). Section 92 guarantees to the individual citizen
liberty to engage in interstate Trade (using only Trade for more convenience,
the other concepts, Commerce and Intercourse, perhaps, are mere derivatives
for the whole concept of commercial trade movement). That this freedom is a
personal one, was put beyond any doubt by the Privy Council in the Bank
Nationalisation Case.14 The Privy Council purposely rejected the volume of
trade theory, i.e. that the total trade activity in a country is not interfered with
by a particular piece of Governmental regulation, although individual parties
may be interfered with in their individual trading transactions, a theory, which,
as will be seen later, has been accepted by Rand J , in Murphy v. The Canadian
Pac$c Railways of Canada.15 Also, the Bank Nationalisation Case held that
the freedom guaranteed to the citizen is freedom from governmental interference by either Commonwealth or State laws. This follows an earlier Privy
that Section 92 binds the
Council decision in James v. The C~mmonwealth,'~
Commonwealth as well as the States. This has meant that matters within the
protection of Section 92 are beyond the reach of all Australian Parliaments.
Section 92 protects acts of interstate Trade and it is, therefore, important to
identify what activities are acts of interstate Trade. It is clear that movement of
goods from one State to another for a purpose which can be regarded as a
trading one or a commercial one is protected, therefore a person who carries
passengers or goods from one State to another cannot be made the subject of
governmental regulation if, what is attacked by the regulation, is the very act of
movement itself."
Again, also, a person who procures movement from one State to another for
the purpose of trade is said to engage in interstate Trade and is likewise
protected by Section 92.
So a contract of carriage or a contract of purchase whereunder the carrier or
vendor undertakes to carry or send the articles interstate is an act of interstate
Trade and hence cannot be made subject to State stamp duty taxes. See
McArthur's Case mentioned above.
I have used the term "Trade purpose" in this discussion when detailing what
movement Section 92 will make absolutely free. This purpose is a question of
fact to be determined by the Court. It is the subjective purpose of the person
who claims Section 92 protection that the Court must determine. Of course,
here, as in other branches of law, the court determines this purpose from the
nature and type of acts done by the person. From above, it will be seen, in outline fashion, what things Section 92 protects, or at least, the principles as
brought out by the Courts when applying the Section. The Courts have
developed a doctrine whereby purposeful movement characterised as trade,
comes within the constitutional protection from governmental interference.
To go on and discuss matter (c). It will be seen that if a law strikes at the
movement of things for a trade purpose, then the law will be declared ultra-vires
the legislature which seeks to enforce it. Many examples of such instances can
be given. State transport laws requiring drivers to hold permits from the State
cannot cover interstate hauliers engaged in interstate trade.18 For here, the carriage of goods interstate is protected, and cannot be subject to State permits
14.
15.
16.
17.
18.
Supra Note 12.
(1958) S.C.R. 626.
55 C.L.R. 1.
Vide A N A v. The Commonwealth 71 C.L.R. 29.
Jackson v. Horne [I9661 A.L.R. 368. Barry v. Stewart [1966)
192
J. M.Herlihy
charging for quantities of goods carried. Again, State or Commonwealth laws
which set up Commodities Boards which seek to purchase all produce of a particular kind from producers, infringe the individual producer's right to engage in
interstate Trade.19
Such examples could be multiplied but it is not my purpose to do that in this
article. Rather, I hope I have given some idea of the principles which the Courts
have spelled out of Section 92. The protection granted by Section 92 is a wide
one. Many Commonwealth and State laws have suffered because of it, for the
Courts strike them down not merely if they affect the actual movement of goods
across the borders, but even if they affect earlier or later stages in a transaction
which involves such movement. This is strikingly shown in the recent High
Court Decision of Pilkington v. Frank Hammond Pty. Ltd.20where an intrastate carrier in Tasmania was given protection by Section 92 by allowing him to
avail himself of the inter-state contractual arrangement between his employer (a
company engaged in the container shipping trade from Tasmania to Melbourne
thence on to London) and the agent for the consignor of the relevant goods (in
this case beef) in Tasmania.
The majority judgments of the High Court seemed to allow this protection
because the journey overland in Tasmania was part of one continuous journey
from the consignor's property to Melbourne. It appears that this decision extends the reasoning given in the Jackson v. Horne decision (supra). If any activity is regulated merely be virtue of its tendency to cause movement from one
State to another, then the law will be ultra-vires the legislature which has passed
it. The Courts, in effect, have to look at laws to determine their real intent and
impact. If the law proposes to regulate a transaction in respects, other than interstate movement, then the Courts will see what is the legal impact of the law.
If it is only movement of goods which is affected, then the law will be struck
down in regard to interstate transactions. While, if some other policy is detected
in the law, for example, Gun Control laws, Censorship laws or Health laws, the
regulation will be upheld as not violating Section 92. An example may perhaps
make this proposition clearer.
If the Parliament of a State passed a law which forbade all drivers on State
roads to drive their vehicles without Police permit, the award of which is in the
discretion of the Police, this law, it will be seen, strikes merely at movement of
vehicles. The policy of this law, it could not be said on any rational basis, is to
protect citizens from accidents and damage caused by motor crashes (a purpose
outside the prohibition), but is merely to prevent people from driving vehicles on
the State's roads. Accordingly, such a law would be struck down as violating
Section 92 of the Constitution. It is the tendency of the Australian Courts to
find only trade movement being regulated in most cases. The regulations upheld
on grounds that the policy of the act only incidentally affects movement of
goods interstate are very few and far between. It is thus seen from this brief survey of Section 92 Doctrine that the positive grants given to the Australian
Parliaments to legislate with respect to trade matters are severely curtailed by
this overriding prohibition.
Now I propose to discuss the situation in Canada.
To deal with the question of Freedom of Trade and Commerce within
Canada, I shall go first to what can be shortly described as the Canadian
equivalent to Section 92, namely Section 121 of the British North America Act.
It states:19. Peanut Board v . Rockhampton Harbour Board 48 C . L . R . 266
20. Pilkington v . Frank Harnmond Pty. Ltd. 48 A.L.J.R. 61.
Constitutional Restraints on Trade and Commerce
193
"All articles of the Growth, Produce, or Manufacture of any one of the Provinces,
shall, from and after the Union be admitted free into each of the other Provinces."
The first thing to notice about this Section is that it refers to articles of
produce etc. These words curtail the Section to tangible goods produced in the
provinces, contra Australian Bank Nationalisation C a ~ e . ~ '
How has this provision been interpreted in its operation in the constitutional
field? The first decision to observe is the Gold Seal Case.22In this case the majority of the Supreme Court of Canada held that prohibition, by the Dominion
Parliament, of the importation of intoxicating liquor manufactured in one
province into another, did not infringe this Section. At page 79 Duff J . said:"The phraseology adopted when the context is considered in which this Section is
found shows, I think, that the real object of the clause is to prohibit the establishment
of customs duties affecting interprovincial trade in the products of any province of the
union."
A similar view was expressed by Anglin and Mignault JJ's2' who added, to
customs duties, other charges of a like nature.
In Atlantic Smoke Shops Ltd. v. Conlin and the Attorney-General of
Canada,24Viscount Simon for the Privy Council remarked, in part, on the Gold
Seal judgment:"The meaning of Section 121 cannot vary according as it is applied to Dominion or
to provincial legislation and their Lordships agree with the interpretation put upon the
Section in the Gold Seal case."
The final decision to mention in this context is Murphy v. Canadian Pacific
railway^.^^ In this case the Plaintiff attacked provisions of the Canadian Wheat
Board Act on one ground which concerns us here-namely that certain charges
which the Board deducts from sales, thereby equalising returns to producers, infringe Section 121 of the British North America Act. The majority of the
Supreme Court merely reiterated the opinions expressed in the Gold Seal Case,
as to the meaning to be given to Section 121, and held that the Wheat Board Act
imposed no charges in the nature of customs duties on goods moving from one
province to another. Rand J . discussed Section 121 at greater length. He
analysed the differences in the federal structure between Australia and Canada
and noted that Section 121 required to be look at differently to Section 92 of the
Australian Constitution. At page 638 of the Report he says that:"Section 121 does not extend to each producer in a province an individual right to
ship freely regardless of his place in the Shipping Order set up under the Act. The exaction must be looked at in the administration of a comprehensive extraprovincial
marketing scheme. One must view the interstate element in these transactions not
from the light of the individual producer of wheat but from the totality of trade movement within Canada of a product of many provinces."
This interpretation of Section 121 is clearly contra the interpretation given to
Section 92 of the Australian Constitution by the Privy Council in the Bank
Nationalisation Case. At page 642 of the Report he says:"I take Section 121 apart from customs duties to be aimed against trade regula21.
22.
23.
24.
25.
79 C.L.R. 497.
62 D.L.R. 62.
Ibid. at 89.
[I9431 A.C. 550 at 569.
[I9581 S.C.R. 626.
194
J. M. Herlihy
tions which are designed to place fetters upon or raise impediments to, or otherwise
restrict or limit the free flow of commerce across the Dominion as if provincial boundaries did not exist. What is forbidden is a trade regulation that in its essence and purposes is related to a provincial boundary."
From these decisions one can see that a vastly different interpretation has
been given to Section 121 to that given to Section 92 of the Australian Constitution. Section 121 has been given a literal interpretation. It is narrow in scope.
The incidents in the single transaction that are protected in Australia, are not so
protected under Section 121 of the British North America Act.
However it is not to Section 121 alone that one must look to find prohibitions
on governmental regulation of trade in Canada. For, seeing that Section 121
does not provide the blanket prohibition that Section 92 does in Australia, it
becomes more important in the case of Canada to analyse the positive grants of
power possessed by the Dominion Parliament and provincial legislatures to
legislate with regard to trade and commerce. As we do so, we will be looking to
see if these powers have been restricted in their scope, so that, perhaps, what is
achieved in Australia by interpreting Section 92 widely, may have been achieved
in Canada by a reading down of governmental powers over the subject of trade.
Firstly I shall discuss the Dominion grant of power. It finds itself in Section
91(2) of the British North America
Prima Facie, it is wide in scope. One
can quite easily see that if used by the Dominion in a wide and expansive sense it
would render the existence of the federal structure a matter of Dominion sufferance, rather than constitutional right. Not surprisingly, therefore, the power
has been given a restricted meaning consonant with its role in the federal arrangement of governmental powers in Canada. I shall only attempt to deal with
notable decisions by the Courts in this process of interpretation. In Citizens Insurance Co. v. Parsons2' the Privy Council read the Head as conferring power
on the Dominion Parliament over "political arrangements in regard to trade requiring the sanction of Parliament. Regulation of trade in matters of interprovincial concern and it may be that they would include general regulation of
trade affecting the whole D ~ m i n i o n . " ~ ~
This decision shows that the Board was prepared to give the power a
reasonably wide ambit within the governmental division of powers. The last
phrase used by the Privy Council in the passage quoted above was ambiguous,
and provided the Dominion with the hope that they could legislate on a wide
variety of matters of national concern under this power.
These hopes were decisively dashed to the ground by successive decisions of
the Courts. Suffice it here to mention that in Toronto Electric Commissioners v.
Snider29the Privy Council, through Viscount Haldane saw Section 91(2) as a
secondary power which the Dominion could rely on to pass regulations, if it
could establish a substantive law under some other Head of Section 91 of the
British North America Act. This approach, even though departed from by a
later decision of the Privy Council in Proprietary Articles Trade Association v.
Attorney-General of Canada,30left its marks on doctrines surrounding the com26. Section 91 states:". . . the exclusive legislative authority of the Parliament of Canada extends to all matters coming within the classes of subjects next hereinafter enumerated; that is to say-(2) The Regulation of Trade and Commerce."
27. 7 App. Cas. 96.
28. Ibid. 113.
29. [I9251 A.C. 396.
30. [I9311 A.C. 310.
Constitutional Restraints on Trade and Commerce
195
merce power, so that, under the last phrase in the passage from Parson's Case
quoted above, only a national trade Marks Statute has been upheld as a valid
exercise of Dominion power over matters of general concern."
The Dominion's power to legislate with regard to interprovincial trade has
fared more favourably. A series of cases show an ever-expanding scope given to
this particular limb of Section 91(2) for here the Courts are faced with the
problem of drawing a line between intra and interprovincial matters. The question posed, is how far can the Dominion go in legislating on matters occurring
wholly within a province, but occurring in the trade movement of the nation?
T o show how the Supreme Court of Canada has faced that question, I
propose to analyse briefly some of its recent decisions on the point.
The Privy Council did not develop the process of drawing the boundaries
between intraprovincial and interprovincial matters. It merely sufficed by making statements as to the scope of the
The Supreme Court has had to attempt the delineation of the Dominion
power in Section 91(2) when faced with actual situations in which its ambit has
to be traced.
In the case R e Farm Products Marketing Act,13 the Court made an attempt
to distinguish between provincial matters and interprovincial matters by noting
that trade involved movement and was a dynamic process.
When once the article enters into the flow of inter-provincial or external
trade, (this latter field was conceded to the Dominion in earlier cases),j4the subject matter and all its attendant circumstances ceased to be a matter of local
concern.35
In the Farm Products Case one can detect the intent of the Court to give the
Dominion power a wider ambit than previously, for one now can determine on
the facts of each case, when the article moves into the flow of goods in the Nation, i.e, when the dynamic process of trade begins. This same approach has
been adopted in later Canadian cases. The most important cases for our purposes being Murphy's Case'6 and Klassen's Case." In the former case, Dominion legislation regulating pooling of grain in the provinces was upheld as being
an exercise of power over the export trade, for the process of exporting wheat
begins at the production in the province.
This latter approach was applied in Klassen's Case to allow the Dominion to
legislate on provincial matters, provided they are merely ancillary to the movement of goods in the trade of the nation. The question is looked at widely, and
the boundary line drawn very close to the production of the goods in question, if
not right at the production level, if one can show a connection with export or interprovincial trade, and, that the subject matter is incapable of being split up
wholly into provincial parts, not related to trade movement of an interprovincial
nature, and parts related to such movement. Thus, it is seen, this interpretation,
now not departed from in Canada, (see the Carnation Milk Case," where the
Court could split the transaction up into intraprovincial elements before trade
31.
32.
33.
34.
35.
36.
37.
38.
Attorney-General of British Columbia v. Attorney-General of Canada [I9371 A.C. 377.
Viz. Shannon v. The Lower Mainland Dairy Products Board (19381 A . C . 708 at 719.
(1957) 2 D.L.R. (2d) 257.
Viz. Lawson v. Interior Tree Fruit and Vegetable Committee [I9311 S.C.R. 57 at 371 in the
judgment of Duff J .
Ibid. Note 33 supra, at pp. 265 and 270 of the Report respectively.
Murphy v. Canadian Pacific Railways [I9581 S.C.R. 626.
Regina v. Klassen (1959) 2 W . R . 369.
Carnation C. Ltd. v. Quebec Agricultural Marketing Board & Others (1968) 67 D.L.R. (2d) 1.
196
J. M. Herlihy
movement interstate began, and later elements in the transaction), has given a
wide scope to the Dominion power. This interpretation compares favourably
with the interpretation given Section 5 l(1) of the Australian Constitution. The
similarities between the interpretation given in Murphy's Casej9 and in the
Noarlunga Case4' in Australia are obvious.
Corresponding to the field given to the Dominion Parliament over trade and
commerce in Canada, the provinces can only legislate with regard to matters of
provincial concern, before the dynamic of export or interprovincial trade has
commenced. Earlier cases saw this as an exercise of the power under Head 13 of
Section 92 of the British North America Act,4' for example, Parson's Case,42
but lately the Supreme Court has categorised this power more correctly under
Section 92, Head 16 of the British North America Act.43
In the Carnation Case44the Supreme Court upheld provincial legislation obviously under this Head of power. The Act in question there, aimed only at the
provincial elements in the transaction, and what came later in time was of no
concern to the Statute. On the other hand in A.G. (Man) v. Manitoba Egg and
Poultry
it was held by the Supreme Court that a Provincial Plan
(embodied in Orders in Council) which sought to regulate the sale, in Manitoba,
of all eggs, wherever produced, even by prohibition of the import of eggs
produced outside Manitoba if necessary, was ultra vires the Provincial
Legislature in that it sought to regulate inter-provincial trade and so was an invasion by the Province of the exclusive legislative authority of the Parliament of
Canada (s.91(2)) over the matter of the regulation of trade and commerce.
Also, in Burns Foods Ltd. v. A.G. (Man./4" the Supreme Court invalidated a
Provincial Regulation, which required that no processor of hogs in the Province
shall slaughter hogs unless they were purchased from the relevant Marketing
Board, on the grounds that it was an attempt to regulate inter-provincial trade
in hogs, because hogs from outside the Province would have to pass through the
Board before they could be bought and slaughtered in Manitoba.
In both cases there was clearly a disadvantage aimed at produce outside the
Province. The inter-provincial trading pattern had to be disrupted, therefore
that was outside Provincial competence.
Thus, the field of Trade and Commerce in Canada can be seen to be covered
by both the Dominion Parliament and the Provincial Legislatures. The general
Dominion power has been read down, but its power over inter-provincial trade
has been extended, and meets the provincial power, which extends only to purely
provincial or local matters.
So, under the positive grants of power under the British North America Act,
the two levels of Government are not curtailed in the regulations that they may
pass to control the exercise of an individual's participation in trade activities. It
is, perhaps, well to mention here that the Dominion, under Section 91(2) of the
British North America Act cannot prohibit trade, but only regulate it,45but
within the sphere of regulation, both Dominion and Provincial Parliaments are
free, provided the regulations imposed to not infringe the Constitutional
39.
40.
41.
42.
43.
44.
44a.
44b.
45.
Ibid. Note 25.
Ibid. Note 7.
The power over "Property and Civil Rights in the Province".
Ibid., Note 27.
The power over "Generally all matters of a merely local or private nature in the Province".
Ibid., Note 38. Also see Rand J . in R e Farm Products (1957) 2 D.L.R. (2d) 257 at 270.
A.G. ( M a n . ) v. Manitoba Egg and Poultry Association (1971) 19 D.L.R. (3d) 169 at 179.
Burns Foods Lid. v. A.G. ( M a n . ) (1974) 40 D.L.R. (3d) 731 at 737.
Vide The Local Prohibition Case [1896] A.C. 348.
Constitutional Restraints on Trade and Commerce
197
Prohibition in Section 121, the interpretation of which has been discussed
above, or the Taxing Prohibitions to be discussed now.
We must investigate the distribution of Taxing Power under the British North
America Act, for if either level of Government cannot levy taxes or charges,
then its right to regulate trade activities may be rendered useless.
The Government concerned would not be able to burden people engaging in
trade, other than by purely regulatory measures, e.g. those of a hygiene nature,
if they could not also levy taxes upon people engaged in trade and commerce. It
could be said, that if this is the result of the interpretation given to the Taxing
provisions in the British North America Act, then, trade and commercial activity is not burdened by any financial provisions to any degree.
I shall very briefly outline the scope of the Taxing powers under the British
North America Act in Canada.
Under Section 91(3)46of the British North America Act the Federal Taxing
Power is very wide in its scope. It is only curtailed by the general requirement
that the Federal Parliament must, when it passes legislation under this Head of
Power, be passing Taxation Legislation, i.e. the Statute must be able to be
categorised as a Taxing Statute and not some other type of Statute passed under
the guise of a Taxation S t a t ~ t e . ~ '
To turn to the Provincial Taxing Power, this is found in Section 92(2) of the
British North America
The only real question at issue here, as seen from
most of the authorities in this field, is the question whether a tax imposed by the
Statute passed by the Provincial Legislature is a direct or an indirect tax. The
principle taken from Mills' definition is amply expounded in Kingcome's Case49
and the Cairns Construction Ltd.
The important question for our purpose, is the effect given to Section 121 as
operating on the taxing powers of both Dominion and Province. In Atlantic
Smoke Shops v. C o n l ~ n , the
~ ' Privy Council adopted a very literal interpretation of Section 121. See the discussion above.
The Board in that case held that the Section was directed at preventing
customs duties on interprovincial trade in the products of any Province. The
provision in that case, a tax on persons buying tobacco for consumption in the
Province, did not impose a customs duty. It was not a tax on a commodity as
such, and was not imposed on every one on receiving the tobacco, but a person
was taxed only if he was a prospective smoker. The same approach was followed
by the Supreme Court of Canada in Murphy's Case.52
Rand J , in the case, exploring the Section more fully, came to the conclusion
that what Section 121 forbids, is a regulation that in its essence andpurpose is
related to a Provincial boundary. Thus, it is seen that the Courts have very narrowly construed Section 121 of the British North America Act. They have not
given the Section any meaning which would free parties from taxing regulations
in their trade dealings, except those few regulations that may attempt to seize
upon the goods themselves, taxing the goods, as it were, as they crow the
46. Section 91(3) mentions laws extending to matters. "The raising of money by any mode or
system of Taxation."
47. The general question of "characterisation" was discussed in Re The Insurance Act of Canada
[I9321 A.C.4.
48. The subsection states:- "Direct Taxation within the Province In order to the raising of revenue
for provincial purposes."
49. [I9341 A.C. 45.
50. [I9601 S.C.R. 419.
51. Supra Note 24.
52. Supra Note 25 especially the majority judgment of Locke J.
198
J. M. Herlihy
border, i.e. customs duties. This interpretation leaves the Governments free to
regulate trade activity by taxing provisions, provided they keep the provisions
"personal" to the use of the goods when once they have crossed the border.
This is in marked contrast to the expansive interpretation given to Section 92
of the Australian Constitution.
Having discussed the main provisions dealing with the subject both in Canada
and Australia, one can now draw some general conclusions. In summing up, one
must notice first the different interpretations given by the respective Courts to
Section 92 of the Australian Constitution and Section 121 of the British North
America Act. These two sections are not comparable in their operation on
persons engaged in trade activities within the respective Dominions. Again, Section 51(1) of the Australian Constitution has to be viewed in the light of Section
92 and the States powers over Trade and Commerce within State boundaries.
Certainly the effect of Section 92 of the Australian Constitution on governmental regulation with regard to Trade and Commerce, would most certainly mean
that cases such as Murphy's Cases3 and Klassen's Cases4 would have been
decided the other way in Australia.
Governmental marketing schemes as existed in those two cases would not be
tolerated in Australia because of the expansive interpretation given to Section
92 of the Constitution.
Finally, as a general statement it might be said that the freedom of
Australians to engage in Trade and Commerce among the States is much wider
than any comparable freedom possessed by citizens of Canada. Corresponding
to that personal freedom, goes the constraint on Governmental powers in
Australia, while in Canada, the restrictions on Governments are not wide in
Constitutional terms, and depend on Governmental willingness or unwillingness
to act.
53. Supra Note 2 5 .
54. Supra Note 37.