Australian Woollen Mills v Commonwealth (1954)
A landmark case distinguishing government policy announcements from contractual offers.
Court
HCA
Judges
Dixon CJ, Williams, Webb, Fullagar and Kitto JJ
Judgment Date
4/5/1954
Material Facts
The Post-War Wool Problem
As World War II ended in 1946, Australia faced an economic puzzle. During the war, the Commonwealth government had controlled wool prices to keep military uniforms affordable. Now, with the return to free market auctions, wool prices would inevitably rise. But the government wanted to keep clothing prices stable for ordinary Australians.
Their solution? Announce a subsidy scheme. Manufacturers who bought wool at auction would receive payments to cover the difference between the old controlled price and the new market price. It seemed straightforward enough.
Australian Woollen Mills, a major manufacturer, took this announcement seriously. From 1946 to 1948, they purchased large quantities of wool and received substantial subsidy payments from the government.
The Sudden Change
In June 1948, the government abruptly announced it was ending the subsidy scheme. But it went further - they demanded manufacturers repay subsidies on any wool still in stock by Christmas 1948. Their reasoning? Subsidised wool should only be used while Commonwealth price controls existed, and those controls were about to end.
After complex calculations, the government demanded £67,282 from Australian Woollen Mills. The company paid up but wasn't happy. They sued to recover this money and also claimed £108,871 in unpaid subsidies for wool purchased just before the scheme ended.
The Legal Question
Was the government's announcement of subsidies a contractual offer that manufacturers could accept by purchasing wool?
This raised a fundamental question about when government announcements create legal obligations versus when they're merely statements of policy.
High Court's Analysis
What Makes a Real Offer?
The Court explained that for a unilateral contract (where acceptance occurs by doing an act rather than making a promise), you need what they called a "quid pro quo" relationship:
"Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo."
In plain English: The announcement and the action must be connected in a "this-for-that" way.
The Missing Link
The Court couldn't find any evidence that the government was requesting or inviting manufacturers to buy wool. As they put it:
"It is impossible to find anywhere anything in the nature of a request or invitation to purchase wool, or anything which suggests that the payment of subsidy was put forward in order to induce any manufacturer to purchase wool."
Government Policy vs Commercial Offers
The Court emphasised a crucial distinction. The subsidies came from:
"instrumentalities of a Government, which has been dealing for years, and is still dealing, with a problem created by a great war. That problem is the maintenance of a price structure."
This wasn't a business trying to drum up sales - it was a government implementing economic policy. The initial announcement was merely "an announcement of a decision on a matter of policy - of an intention which has been formed by the Government."
The Discretion Problem
Throughout the scheme's operation, the government maintained it could:
• Review and vary subsidy amounts
• Refuse subsidies for "unreasonable" bidding
• Withhold payment if manufacturers bought "excess" wool
• Deduct amounts for various reasons
As the Court noted, manufacturers never challenged these actions as breaches of contract. Why? Because everyone understood this was a government scheme, not a commercial deal.
The Decision
The High Court found no contract existed. The government's announcement was:
"an announcement of intention, which is not capable of leading to a contract."
The Court concluded that:
"the Commonwealth authorities never for a moment intended to make an offer capable of leading to a contract binding the Crown, and that nobody ever supposed for a moment that they did so intend."
Why This Matters
This case established important principles about government-citizen interactions:
1. Not Every Promise is Contractual:
Government policy announcements, even ones involving payments, don't automatically create contractual rights
2. Context is King:
A promise from a business ("Buy our wool and get a rebate!") is fundamentally different from a government subsidy scheme
3. Look for the Request:
True contractual offers invite or request action. Policy announcements merely state what the government intends to do
4. Discretion Destroys Contracts:
When government retains broad discretion over payments, it suggests policy implementation, not contractual obligation
The Human Side
What makes this case fascinating is how it reveals different perspectives on the same events. The manufacturers saw promises they could rely on. The government saw policy it could adjust as needed. The Court had to decide which legal lens applied.
In the end, Australian Woollen Mills lost their case but gave us a lasting precedent: when dealing with government, an announcement of benefits isn't the same as a business offer. It's the difference between "We will pay subsidies" (policy) and "If you buy wool, we promise to pay you subsidies" (potential contract).
The case remains a cornerstone in understanding when government creates legal obligations and when it's simply governing. For anyone dealing with government schemes, subsidies, or benefits, the message is clear: don't assume every announced benefit creates a legal right. Sometimes, a promise is just a policy.