R v. Connare; ex parte Wawn61 CLR 596
(Judgment by: Latham CJ)
Ex parte: Wawn
Freedom of inter-State trade
Object of State lottery legislation
Constitution (Cth) - s 92
Lotteries and Art Unions Act 1901 (NSW) No 34 - s 21
Judgment date: 17 May 1939
Melbourne (heard in Sydney)
The question which arises upon this appeal is whether s. 92 of the Constitution is infringed by a New South Wales statute which prohibits the sale or offer for sale in New South Wales of tickets in lotteries which are lawful in other States of the Commonwealth.
Section 92 of the Constitution, so far as relevant, is in the following terms: "On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free."
The Lotteries and Art Unions Act 1901-1929 of New South Wales contains provisions in general terms prohibiting lotteries and games of chance but permitting charitable lotteries under conditions, and certain art unions. In 1922 the Act was amended by inserting new sections. One of these new sections, s. 19, was as follows: "The expression foreign lottery in this Act means any lottery conducted or to be conducted outside the State of New South Wales and whether legal in the place where it is conducted or not, or whether it is described as a lottery, or as a sweep, consultation, or golden casket, or called by any other name or designation."
The evidence in the present case shows that a lottery known as Tattersall's Consultation is conducted in Tasmania, that a lottery named the Golden Casket is conducted in Queensland and that both of these lotteries are lawful in the States in which they are conducted. The Government of New South Wales conducts a State lottery under the State Lotteries Act 1930.
Section 21 of the Act is as follows: "Whosoever sells or offers for sale or accepts any money in respect of the purchase of any ticket or share in a foreign lottery shall be liable to a penalty not exceeding twenty pounds." The appellant was prosecuted for an offence under this section and was convicted. The evidence showed that he was an agent for the sale of tickets in Tattersall's consultation and that he offered tickets for sale and sold them. His only defence was that s. 21 was invalid because it was an infringement of s. 92 of the Constitution.
At the outset I call attention to the fact that the section does not penalize persons because they gamble or because they enter into some particular kind of gambling contracts. Section 92 would have no operation in relation to such legislation. Gambling admittedly is not trade and commerce. Section 92 does not prevent a State Parliament from regulating or from prohibiting gambling if the State Parliament wishes to do so. The objection in this case is that the State law has selected for prohibition an element in gambling transactions which is trade and commerce, namely, the sale etc of articles which are commonly bought and sold. It is argued that the State cannot, in order to discourage gambling, use the means of prohibiting inter-State trade and commerce in lottery tickets.
The New South Wales statute prohibits the sale of lottery tickets in lotteries conducted in other States. The prohibition does not depend upon any fraudulent character of such lotteries or upon anything unfair in the manner in which they are conducted. The Parliament of New South Wales has not assumed to say that Tattersall's Consultation in Tasmania and the Golden Casket in Queensland are fraudulent enterprises. The mere fact that a lottery is a foreign lottery makes the sale of tickets in it illegal. Thus the statutory provision is simply a prohibition of trading in tickets in foreign lotteries. The prohibition contained in the section is based simply upon the fact that the lottery tickets are tickets in foreign lotteries, that is, that they are conducted outside New South Wales in another State of the Commonwealth or in some other country. The sale of a ticket in any lottery (lawful or unlawful) conducted in New South Wales would not be a breach of this section and there can be sales of tickets in lawful lotteries conducted in New South Wales which would not infringe any section.
Prohibition of selling an article is an interference with trade in that article (The Commonwealth and Commonwealth Oil Refineries Ltd v South Australia; [F1] Vacuum Oil Co Pty Ltd v Queensland; [F2] James v The Commonwealth). [F3] Thus prima facie the prohibition of all sales of tickets in lotteries conducted in other States is an interference with trading in those tickets and, as the tickets come from other States, is an interference with inter-State trade.
It is contended for the State of New South Wales (which has been granted leave to intervene in the appeal) that the section only prevents what should be regarded as an illegitimate form of trading and that s. 92 does not prevent a State parliament from prohibiting the sale of foreign lottery tickets though it may permit or even encourage the sale of tickets in approved local lotteries. But s. 92 might as well be repealed if any parliament can select any part of inter-State trade and condemn it as illegitimate simply because the parliament objects to any trade taking place in particular articles. It is necessary to inquire whether the Parliament of New South Wales has simply, as it were, disqualified certain inter-State trading of which it elects to disapprove, or whether the challenged provision can be shown to possess a character which removes it from the category of prohibited interference with inter-State trade and commerce.
In James v The Commonwealth [F4] their Lordships of the Privy Council have made an exposition of s. 92 which it is the duty of this court to apply. James v The Commonwealth [F5] shows that some legislative regulation of inter-State trade is permissible. Thus, for example, it is said that s. 92 does not prevent the prohibition by a parliament (either Federal or State) of "objectional trade practices in inter-State trade" or "illegitimate methods of trading" in such trade. [F6]
But a mere prohibition of all trade in particular articles is something different from the preventing of objectionable practices or illegitimate methods in trade. In Fox v Robbins [F7] Griffith C.J., referring to a State law requiring a higher licence fee to be paid for selling wine manufactured from fruit grown in another State than for selling other wine, said: "This provision would be quite illusory if a State could impose disabilities upon the sale of the products of other States which are not imposed upon the sale of home products". [F8] Absolute prohibition of sale of the products of other States would be an a-fortiori case. The passage which I have cited from Fox v Robbins [F9] was cited with apparent approval by the Privy Council in James v The Commonwealth. [F10] This principle is very relevant in the present case.
I refer to some passages in James v The Commonwealth, [F11] which further support the view that a mere prohibition of inter-State trade cannot be justified and that such a prohibition is to be regarded as different in kind from a regulation of trade which permits trade to proceed, though subject to conditions imposed by statute.
In James v The Commonwealth [F12] the importance of James v Cowan [F13] is said to be that the test of validity which was adopted in that case was whether the object of the Act was to prevent the sale of the commodities in question-whether the Act was directed "against selling to any of the States." Such a prevention of sale was said to be "restriction or prohibition of export from State to State, which necessarily involves an interference with the absolute freedom of trade among the States". [F14] In the present case we have a prevention of the sale of Queensland and Tasmanian lottery tickets in New South Wales. It is, I think, plain that trading in such lottery tickets is prevented.
After reference to various statutes which are said to be valid because, though regulating trade, they do not interfere with the freedom of trade in passing across State borders, [F15] a line is drawn between legitimate regulation and illegitimate prohibition of inter-State trade or intercourse by adopting the criterion of "freedom as at the frontier". [F16] This is explained to mean that (in the case of intercourse) there should be no "burden hindrance or restriction based merely on the fact that" (persons) "were not members of the same State" and (in the case of trade) that there should be no "special burden on the goods in the State to which they have come, simply because they have come from the other State". [F17]
The application of the principles laid down in James v The Commonwealth, [F18] as I understand them, leads to the conclusion that, as the New South Wales provision now under consideration is a prohibition of trading in lottery tickets simply because they come from places outside New South Wales including other States, it is obnoxious to s. 92 of the Constitution unless there are some grounds for distinguishing lottery tickets from other things which are commonly bought and sold. The respondent accordingly contends that lottery tickets cannot be the subject of trade or commerce. The contention is that what is prohibited under the name of the sale of a lottery ticket really is the making of a wagering contract. The transaction between the conductor of the lottery and the first purchaser of a ticket from the conductor of the lottery or from his agent is, it is argued, really the making of a wagering contract of which the ticket is evidence. When an ordinary contract is put into writing and the writing is given by one party to the other, the former party cannot be said to sell the document to the latter party. What is called the sale of a lottery ticket is, it is said, really the same kind of transaction.
Before this argument is considered it should be noted that what s. 21 of the Lotteries and Art Union Act penalizes is selling a foreign lottery ticket or offering it for sale. If it is impossible for any person to sell a lottery ticket then it is impossible to convict any person under the section. Thus it would appear that if the State were to succeed in the argument that a lottery ticket cannot be sold and thus prevent the legislation from being invalidated by s. 92, the only result would be that no conviction could be obtained under the section because the same argument shows that no person could have been guilty of a breach of the section. This result can be avoided only by attaching some unusual meaning to the words "sell" or "sale" in the section, but that meaning has not been stated.
It must, however, be admitted that the question whether a lottery ticket can be bought or sold in such a way as to make the transaction of buying or selling a transaction in trade or commerce is one of difficulty. The question arose in the United States of America and it was decided in Champion v Ames [F19] (the Lottery Case ). In that case it was decided that the carriage of lottery tickets from one State to another by an express company was inter-State commerce. It was further held that Congress could (under the commerce power) prohibit such carriage of lottery tickets. There is no provision in the Constitution of the United States corresponding to s. 92. The case was first argued in February 1901, it was re-argued twice, and it was ultimately decided (in February 1903) by a majority of five justices to four justices. Such a record indicates the difficulty of the problem which confronted the court. It was held by the majority that "These" (lottery) "tickets were the subject of traffic; they could have been sold; and the holder was assured that the company would pay to him the amount of the prize drawn". [F20] The minority took a contrary view, holding that lottery tickets were simply evidence of the existence of contractual relations and "that they are not subjects of trade and barter offered in the market as some-thing having an existence and value independent of the parties to them". [F21] I refer to Champion v Ames [F22] not as an authority which should in any degree govern the decision of this court, but for the purpose of indicating the dividing line between the two views, one only of which can be adopted by this court.
I agree that entering into a lottery is not in itself a transaction of sale and that a person who "buys" a ticket in a lottery from the conductor of a lottery or his agent makes a wagering contract with the lottery conductor. The section of the New South Wales Act applies not only to such a transaction, but also to the sale of the ticket by such a purchaser to another person. In the latter case there is an assignment of a chose in action. But I am of opinion that a lottery ticket can be bought and sold. The New South Wales legislature was evidently of the same opinion, as the terms of the Act show. The defendant was an agent for the sale of both Tattersall's Consultation tickets and Golden Casket tickets. The evidence is that he sold large numbers of lottery tickets-PD130,000 worth in three Golden Casket consultations.
For many years English legislation has dealt with the sale of lottery tickets. There were State lotteries during various periods from 1569 to 1826. The sale of tickets in other lotteries was regulated or prohibited from time to time: See Paul's Police Offences, 2nd ed. (1934), pp. 375 and following; Windeyer on Wagers, Gaming and Lotteries in Australia, Introduction; Quan Yick v Hinds, [F23] at pp. 356, 357; Encyclopaedia Britannica, 14th ed., vol. 10, p. 11-"Gaming and Wagering". In all States of the Commonwealth there is legislation dealing in express terms with the sale of lottery tickets. This statutory history makes it very difficult to contend that a lottery ticket cannot be the subject matter of a transaction of sale.
It is common to speak of the sale of government bonds, of shares in companies and of railway tickets. The result of such transactions is that the purchaser of the bond becomes a creditor of a government, the purchaser of the share becomes entitled to obtain registration as a member of the company in respect of a particular number of shares, and the intending passenger enters into a contract for carriage by the railway authority. In each case it might be said that the real transaction is not a transaction of sale and purchase. But in each case the transaction does involve in a real sense and in a legal sense an element which is a sale. The transactions involve the delivery of the bond, of the scrip, or of the railway ticket, with a transfer of the property therein to a purchaser unless, in the last case, some special provision prevents such a transfer of property. So in the case of the sale of a lottery ticket there is an element in the transaction which includes the sale of a lottery ticket to a buyer. The ticket is transferred to the buyer so that he becomes the owner of the ticket. This element in the transaction is not the whole of the transaction, but it is the part of the transaction which is dealt with by s. 21 of the New South Wales Act. It is a trading element in the transaction and it is this which is prohibited by s. 21: Cf. Rummens v Hare, [F24] where the court distinguishes between the transfer of a document and a transfer of the rights evidenced by the document.
It is further argued on behalf of the State that s. 21 is not legislation upon the subject of inter-State or foreign trade, but upon the subject of lotteries. It is said that James v The Commonwealth [F25] shows that it is necessary to look at the character and nature of legislation before considering whether or not it conflicts with s. 92 of the Constitution, and that if legislation can be assigned to some other category than that of "trade and commerce legislation," then the fact that the legislation may interfere with trade and commerce to some extent does not necessarily make it invalid: See James v The Commonwealth. [F26] For example, it is said that a man may be arrested for crime while about to cross a State frontier in the course of a trade operation and that such an arrest is no infringement of s. 92. [F27] Accordingly it is argued in this case that the Act is directed generally at the suppression of lotteries subject to exceptions, and that an Act which is really dealing with suppression of lotteries ought not to be regarded as dealing with trade and commerce, although it may have an effect upon trade and commerce. It is difficult, however, to assign lottery tickets to a class of articles which are criminal in nature or which, for some other reason, can be regarded as not articles of trade and commerce. Doubtless s. 92 does not prevent the States from punishing the sale of obscene pictures or writings, or from preventing the sale of diseased meat, or other unwholesome food, or of impure or dangerous drugs. But can lottery tickets in Australia be placed in the same class as these articles?
It is true that very strong views are entertained by many people upon the subject of lotteries. Those views were admirably expressed in 1850 in the case of Phalen v Virginia, [F28] a case which has frequently been cited in later decisions:"Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the widespread pestilence of lotteries. The former are confined to a few persons and places, but the latter infests the whole community; it enters every dwelling; it reaches every class; it preys upon the hard earnings of the poor; it plunders the ignorant and simple". [F29] It would be pleasing to adopt these moral sentiments as the basis of a judgment in support of State legislation directed towards the suppression of lotteries. But it is not for this court to set itself up as a general censor morum. The legislatures of all the Australian States permit lotteries subject to conditions. The court should not profess to ignore the fact that lotteries on a large scale are conducted in New South Wales, Queensland and Tasmania with the support of, and to an extent under the active management of, the government. Whatever my opinion as to the social and economic effect of lotteries may be, I find myself unable, in this state of Australian legislation, to justify as a judicial act the condemnation of all lotteries as a moral pestilence so as necessarily to remove the sale of lottery tickets from the category of legitimate trade and commerce and to place it in a separate legislative compartment.
It has been suggested that, while a State may be prepared to allow lotteries to be conducted within the State subject to the control of laws administered by the officials of the State, it may yet properly be concerned to protect its people from other lotteries over which the State has no control which may possibly be conducted in a fraudulent manner. Such an attitude is readily intelligible and it may constitute the best practicable and available means of dealing with a very difficult subject. But such considerations cannot exclude the application of a relevant constitutional prohibition. Further, the legislation in question does not base itself upon the presence of any fraud or improper practice in the management of a lottery. It is not for this court to presume that, while lotteries conducted in New South Wales are honestly conducted, lotteries in other States are or may be dishonestly conducted. The legislation cannot be supported as directed towards the prevention of fraudulent or undesirable practices in connection with the sale of lottery tickets. It does not regulate the sale of foreign lottery tickets. It simply prohibits such sale.
In the course of the argument various analogous cases were suggested. I take one for the purpose of illustration. Very strong opinions are held by many persons upon the subject of smoking tobacco. They regard it as a positive vice. Others regard it as an undesirable and very objectionable habit. If a parliament of a State took this view would it be open to that parliament, in the face of s. 92, to prohibit the sale within its borders of all tobacco or of all tobacco brought from other States? In my opinion such legislation would be invalid and such legislation could not be distinguished in principle from the legislation under consideration in this case. Section 92 prevents any parliament, whether Federal or State (James v The Commonwealth), [F30] from merely disqualifying an article from entry into inter-State trade, though, according to the same case, it permits at least some regulation of any inter-State trade. A parliament may prescribe some rules according to which such trade may be carried on, but it cannot merely prohibit it.
The kind of difficulty which arises in this case was actually foreseen in the case of intoxicating liquor. It was realized that s. 92 would protect the sale in one State of such liquor brought from another State. Accordingly s. 113 of the Constitution provided as follows: "All fermented, distilled, or other intoxicating liquids passing into any State or remaining therein for use, consumption, sale, or storage, shall be subject to the laws of the State as if such liquids had been produced in the State." There is no provision corresponding to s. 113 dealing with or affecting the subject of lottery tickets.
Not without difficulty the Privy Council has, in James v The Commonwealth, [F31] saved from the operation of s. 92 pure food and health laws, traffic and transport regulation, and other legislation specifically mentioned in the judgment. But I have been unable to find in James v The Commonwealth [F32] any principle upon which reliance can be placed in upholding the provision which is challenged in this case-a provision which operates, in the case of lottery tickets brought from another State, merely to prohibit their sale.
For the reasons which I have stated I am of opinion that lottery tickets can be bought and sold and can therefore be the subject matter of trade and commerce. Section 21 of the New South Wales Act penalizes the sale of "foreign lottery tickets." Accordingly it interferes with the freedom of sale of lottery tickets coming from other States as freedom of sale is described and illustrated, rather than precisely defined, in James v The Commonwealth. [F33]
In my opinion s. 21 of the Lotteries and Art Unions Act (N.S.W.) is therefore invalid. I recognize that such a decision may be surprising and, indeed, alarming to many, but a doctrine of free trade is not consistent with a practice of prohibiting trade.
In my opinion the appeal should be allowed.