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1916 Supreme(SC) 63
Privy Council
Lord Parmoor, Lord Shaw of Dunfermline, Lord Atkinson, Viscount Haldane, Justice Lord Buckmaster, JJ.
Commercial Cable Company -Appellant
Versus
Governor of Newfoundland -Resopndent
On appeal from the Supreme Court of Newfoundland
Decided On : 31-07-1916
Berridge, Burn , Ackroyd, Regge , Barrington Ward, Gordon Hewart , M. Macnaghten, R. Finlay
In a responsible government, contracts creating public charges or prospective duty exemptions are not binding without legislative sanction. The governor's public contracting power is limited by constitutional conventions and his commission, and parties dealing with the executive are presumed to accept these restrictions.
Headnote:(A) Constitutional Law - Executive Power - Binding Nature of Contracts - Contracts extending over a period of years and creating a public charge, actual or prospective, entered into by the government, are not binding until approved by a resolution of the legislature. Such rules are part of the constitutional convention and are binding on the executive, which is responsible to the legislature.
(B) Administrative Law - Governor's Authority - The capacity of a governor is defined and limited by his commission and instructions. When contracting in a public capacity, it is presumed that the contract is subject to the constitutional restrictions of the colony. Any person transacting public business with the governor is taken to accept these restrictions, and the governor cannot bind the parliament and the people beyond the constitutional conditions of his appointment.
(C) Statutory Interpretation - Remission of Duties - A statute enabling the governor in council to remit duties or tolls payable to the crown in particular cases does not apply to contracts providing for exemptions of a prospective and continuing character, as such exemptions require special legislative sanction.
Facts of the case:
An agreement was entered into between a company and the government of a colony for the landing of transatlantic cables and the establishment of a cable station. The agreement provided for annual subsidies to be paid to the company and the duty-free import of materials. The agreement was executed by the governor in council but was not subsequently ratified by the legislature. A subsequent administration repudiated the contract, claiming it was not binding without legislative sanction, leading to a claim by the company for unpaid subsidies and reimbursement of duties paid on imported articles.
Findings of Court:
The agreement was not binding because it lacked the necessary legislative sanction. The governor, acting in his public capacity, could not bind the parliament and the people beyond the constitutional restrictions imposed by his commission and the conventions of the responsible government. The agreement could not be made binding piecemeal.
Issues: Whether an agreement executed by the governor in council, which creates a public charge and provides for prospective duty exemptions, is binding on the government in the absence of legislative ratification.
Ratio Decidendi: In a system of responsible government, grants of public money or prospective remissions of duties are within the discretion of the legislature. The governor's authority is limited by his commission and constitutional conventions; therefore, any contract made in a public capacity is presumed to be subject to these restrictions. No contract exists unless the legislative discretion has been exercised in a sufficient fashion.
Result: Appeal rejected.
Legal Category Hierarchy
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constitutional law
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executive power
- governor's authority
- responsible government
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legislative authority
- legislative ratification
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executive power
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administrative law
- public contracts
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tax law
- duty exemptions
Viscount Haldane:—
This is an appeal from the conclusion come to by a majority of the Supreme Court of Newfoundland. What has to be determined is whether the appellants, who are an American company incorporated in the State of New York, are entitled to recover two sums of 12,000 dollars and 10,916 dollars alleged to be due under an agreement under the great seal of Newfoundland, dated 18th February 1909, to which the parties were the appellants and the Governor of Newfoundland in Council.
The agreement was made under the following circumstances. Prior to 1905 the appellants owned and worked five submarine cables laid between Waterville in Ireland and Canso in Nova Scotia. None of these cables reached to Newfoundland. By an agreement, dated 26th August 1905, made between the appellants and the Government of Newfoundland, and subsequently confirmed by statute of the Legislature of Newfoundland ( 6 Edw. 7, c. 10 ), to which it was scheduled, the Government agreed to grant to the appellants, on certain terms and conditions, the right to land any of its through cables in Newfoundland.
In September 1905, a cable had been laid by the appellants from Port aux Basques, on the south coast of Newfoundland, to Canso, in Nova Scotia. This cable became the property of the Government, who worked it. It was in order to develop the system so brought into existence that the agreement of 26th August was entered into. That agreement provided for the maintenance of the new cable and for exchange of traffic. It also provided that the Government should grant to the appellants the right to land any of their through cables in Newfoundland on certain terms and conditions, and for grants of cable stations and wayleaves. The duration of this agreement was to be ten years.
Later on, in 1909, Sir Robert Bond, who was then Premier of Newfoundland, entered into negotiations with the appellants with a view to the appellants landing one of their transatlantic cables at St. John's and these negotiations culminated in the agreement of 18th February 1909, now in controversy. By this agreement the appellants contracted to cut one of their transatlantic cables and extend it to Newfoundland and thence to New York, and also to establish a cable station at St. John's. The duration of the agreement of 26th August 1905, was to be extended to twenty-five years. The appellants were to pay the Government a certain proportion of their receipts for messages. The Government were to pay to the company 1,000 dollars annually for the facilities thus to be afforded, and to grant them the right to land the new cable in Newfoundland, as well as lands for cable stations and wayleaves for the cables. The appellants were to have entry duty free for their materials and appliances, and the contract was to last for twenty five years. The appellants selected a landing-place and entered into a contract with a construction company, for the manufacture and laying of the new cable. The cable appears to have been made and landed, and some work was done by the appellants towards establishing a cable station at St. John's. The Government used the cable on certain occasions, but it appears to their Lordships that this was done under special arrangements, and that it cannot be taken to have amounted to an adoption in itself making the contract binding on the Government.
For the purpose of installing the new cable the appellants imported into Newfoundland certain articles which would have been admitted duty free had the contract been carried out by the Government. But the Government has claimed duty on these articles on the footing that the contract is not binding, and the appellants have paid in respect of duties sums amounting to 10,916 dollars. This is the second amount claimed, and it is claimed as recoverable by the appellants under their contract. They allege that they are entitled to have it repaid to them and to receive the first item of 12,000 dollars, being the amount for three years of the an
