Bank of NSW v The Commonwealth

[1948] HCA 7

\pplCent

himheruA

Cnouch V Ŝ!bCo>p

- Bank of Communoner

OcciTia/y,

ftyLfciv

gJurfUW 165

Afro^naf

ommuaion,$avin/p Bank N<w South

Commimanv

tLl—

CLR 360

U 16AU>]9

of Australia WaUs

9i;59AUR tSSUor,

85

Commissiofier

f61 CLR 639

ALR61

W9 PkIM 71

y Minister 15

ALD191

AlJUli

Coot

Cons

/^anetd

State Bank of

fnduMtneaHair Studio NSWy CAx

hyUdyTVW

Saving Btmk

i'i''''()liTS OK CASKS lli-*

Enterprises of Australia

Ltd 18 FCR 1

Cons Gould V Cons.

(?7 ALR 535

Consu^r^uickenden

RefdtôAfia ALĴWl

v

S'W te‘ inor

Pootbail

Uapjtlrie v

Ap

/nrtiVu/rfWl) ÂMonPly <97

FCR

ffcHamzy

Foil

INSD IN

Cuy of Char-

v

Ca^OT

Conarae^

27FCRS49 ' f,T^

199«r72

Tricon

Constructions

^7

International (NSmPty

Auk

t'S;-

L 293

Restaurants

ALR 217

LtduNeison

I (2001) 1)5

92 ALR 193

ITJ FCRTf

CR 78

IIKill COIjKOFAFSi

It n IJIA

Appi

FoU

Us Stanton;

Con* A-G App!

Bouskev

Foil

EtpaneUCTy State (iVA)yAustrun

VFoilFoil

Susie Bank of

Atypciaifd

AFCOu Concrete

NationalMinisterfor

_

Bank of New

New South

■ • 'Vnv

Bank c£ New

ConstJuctiaru

Pmnary Tobacco

Soutfi Wales Atrhnes_

.

5«/// “

Lid Sou th Wales

(SS^Ply

industries AInstitute

96

fl<«OWj <R>

FCR3T

141

UdvNelion

!Mjf̂250 1̂976)̂ IfALR

670

m.

17 IPR 39

[HKJIl COURT OF AUSTRALIA.]

^•JIC

H. <:. or A.

sr

;ank of newSOOTH WALESANl)^

1948.

I’laintifks

OTHERS

.

Melboi-rnk,

>I1/A|);

(\r)pl

rvua

ic/l V AND Feb. 9-12,

ytytUsstoner

rtwiol

' Kailwuys'llailH

10-20,23-27 :

THE COMMONWEAl/rii AND OTHEHS

Dkkknoa.vts.

March 1-5,

8-12, 15-19,

Tm

^ralia

22-25, 31 ;

April 1, 2;

UNK OF AUSTHAI.ASIA AND OTHERS.

Fl.mntiffs ; ‘

___:

ânonwi^

Sydney,

rnw Pty Ltd

AND

April

13

1.5,

ITOT

.4 'ig. 11.

MIE COMMONWEALTH AND OTHEHS

I)f;fe.\iiants.

•n* htffis V

utrtum-

I-iktham C'.J.,

alik Tntd-

Kioh, Slarkr,

: Bank of

nixon,

uraua.

McTlirnan anil

WilllaiiLH JJ.

STATE OF VICTORIA AND ANO'I'HEH

I’l-Aintiffs ;

Coo« North

eastern Dairy

AND

Coy Dairy

*nmary

InJktssty Au^

rtdujtnea .

134̂

'HE COMMONWEAi;ni AND OTHEHS .

59

Defendants.

Com

'M

tVt'Jiem

J^7i992)

jinittŝotyv

.79 FCR 201

.otnuuMi’

IT ATE OF son'll AUSTRALIA.\ND^

Com

Rlaintiffs

SOS

ANOTHER

.

^nSan, Re;

xpane

AND

^

/

^7

HECOMMONWEALTHAND OTHERS

J)eeendants.

^nv

29>

STATE OF WESTERN AUSTR.VLIA AND"l

|Ln,Rc

Ri.aintieks

pane

ANOTHER............................................/

THE COMMONWEALTHAND OTHERS

Defendants.

Apo) State

Oilman V

{SflPr

Dised

Aumosinea

SwiaeHand

Cons 7*0/̂.̂

App*

trtwertst

?3TAra

iHsuranee

318 pZ^

Taxanon wA

Australia Ltd v

^fXmany

|I996)«9f̂

Mowie Fisheries

Ci)̂ 140

P Mmerals

ALR 129

Refd to ConsCons

Foil

Foil

R V Land UseClenae

.P/y ^ .r w" V_

P V Dunne

1

Appl Newcrest

,Ltd V AmO'Haliornn

(2003) 31

Cons '

C olcman

Ebner.Re;

,

Mining (fV}0 Green

Banking

hmLR 178

v Davies

g000̂ll57g002] 2 QdR

EbnervOfficiaH

Limited V BH

Group 11999]

(1997) 95

Trustee in- ]

i vTsYl

P Minerals

ACrimR 238

Pl/l

Limited dc Cth

Bankruptcy

(1997)71 (1999)161 1(53:

i LGERA 38

AUR1346ALR 557

HIGH COURT[1948.

H. C. OF A. Constitutional Law—Powers of Coinnionwealth Parliament—Hanking—Acquisition

1948.                 of property—“ Just terms ”—Original jurisdiction of High Court—“ The Commonwealth, or a person . . . sued on behalf of the Commonwealth ”—

Bank of

Coimnonwealth Bank—Agency of Government—Freedom of trade, commerce

N.S.W.

r.

and intercourse among the States—Interference with governmental functions of

'I'HEStates—The Financial Agreement—Statute—Interpretation— Validity—Sever­

CIOMMON-

WEALTH.ability —The Constitution (6:1 & 64 Viet. c. 12), ss. 51 (.viii.), {xx.), (xxzi.), [xxxix.), la (Hi.), 92, 105a—Banking Act 1947 {̂Vo. 57 of 1947)*—Commonwealth Bank Act 1945 [Bo. l:l of 1945).

The following provisions of the Banking Act 1947 are beyond the powers of the Parliament of the Commonwealth : Part IV., Division 2 (except in so far as it relates to voluntary acquisition and apart from any effect s. 14(1) may have in relation to voluntary acquisition). Part IV., Division ;i, ss. 24 and 25, Parts VI. and VII., and ss. 59 and 60.

Per Rich and Williams JJ. {Latham C.J., Dixon and McTiernan JJ., contra) : Section PI is not a law for the acquisition of property for any purpose in resjject of which the Commonwealth has power to make laws ; it is not

So held : — dissenting), because—so far as compulsory acquisition is concerned—the provisions of the Division (in particular, ss. Bl and 14) embody a scheme for the acquisition of j>roperty for which the Act fails to provide just terms as required by s. 51 (xxxi.) of the Constitution. Further grounds of invalidity are :—

As to Part IV., Division 2—

* The following is a summary of the if any provision of the Act is inconsi.s- material provisions of the Banking Act

tent with the Constitution, that pro­

1947 : --T'he objects of the Act, as vision and all the other provisions of

stated in s. .‘i, include {a) the expansion the Act shall nevertheless operate to

of the banking business of the Com­the full extent to which they can

monwealth Bank as a publicly owned 0])erate consistently with the Constitu­

bank conducted in the interests of the tion ;

{b) that the provisions of ])ar.

people of Australia and not for private

{a) shall be in addition to, and not in

profit; {b) the taking over by thesubstitution for, the provisions of

Commonwealth Bank of the banking s. 15a of the

Acts Interpretation Act

business in Australia of private banks 1901-1941 ; and (c) that s. 6 of the

and the acquisition on just terms of

Banking Act anti s. 15a of the Acts

])roperty used in that business; (c)

Interpretation Act 1901-1941 shall

the prohibition of the carrying on of have effect notwithstanding that their

banking business in Australia by operation ^liiy result in.^he

Banking

private banks. Section 5 provides

Act having an effect different, or

that “ ])rivate bank ” means a body apparently different, in substance from

corporate the name of which is .set out

the effect of the provisions contained

in the First Schedule to the Act.

The in the Banking Act in the form in which

Schedule contains a list, divided into it was enacted by the Parliament.

three Parts, comprising all the institu­Part IV'. (ss. 9-25) is headed “Expansion

tions carrying on business in Australia of Banking Business of Commonwealth

which are commonly called trading Bank.” Division 1—“ Preliminary ”

banks : in Part I., those incorporated - contains the following provisions :—i

in Australia, in Part 11., those incor­Section 9; The powers specified in

porated in the United Kingdom, and, Divisions 2 and li of this Part are

in Part III., those incorporated else­

conferred for the purjiose of facilitating

where. By s. 6 it is declared to be the intention of the Parliament—{a) that

the control by the Commonw'ealth

Bank of the banking business in Aus-

7(1 C.L.R.]

OF AUSTRALIA.

icIhU-iI to 8. 51 (xiii.) of tlie (‘tmHtitiitioti and would not (>e authorize*! by

H. C. OF .\.

8. 51 (xxxi.) even if just tormK were provided, /'er

194S.

Rich, Rtarke and II Ulianut

.).).: Section 14 in not a law with respect to banking witbin the meaning

Bask

of

of s. 51 (xiii.) of, and in not supported by any other power in, the Constitution.

X.S.W.

Re.r Lathum

and Dixon .1. : Section 14 (2) is not a law with res|>ect to

r.

thr- acijuisition of profwrty within the meaning of 8. 51 (xxxi.) of, and is not

The

C0M.M

0X-

supported by any other j)Owcr in, the Constitution. /Vr

Rich anil WiUintm

WEALTH.

J.J. (iMlham C..J., Rlarkc, Dixon and McTiernan .l.J. contra) : Sections I.’! and 14 are inconsistent with the Financial Agreement and, therefore, with s. 105a of the Constitution.

tralia of private banks and for the pur-

As to Fart IV., iJivision IF - and McTiernan .M. : ft provides for^ the acquisition of property and because the Act fails in the provision of just terms for the acquisition it is, therefore, in conflict with s. 51 (xxxi.) of the Constitution. By Rich and Williams J.l. : It is not a law with resjiect to banking within the meaning of s. 51 (xiii.), and is not authorized by s. 51 (xxxi.), of the Constitution ; it discloses no purpose related to s. 51 (xiii.) or to any other legislative jiower of the Commouwealtb, and even if it was otherwise within s. 51 (xxxi.), it would fail because just ti-rms arc not provideil; moreover {Ijathani C.d., Rtarkc, Dixon and McTiernan .1.1. contra), it is inconsistent with s. 105a of the Constitution. Hy Starke .1. : It is not authorized by s. 51 (xiii.), (xxxi.), (xxxix.), together or separately ; further, if it was otherwise within a. 51 (xxxi.), it would bo invalid becau.se just terms of acquisition are not provided.

or priqier for the Commonwealth Bank

po.se of furthering the expansion of the to divulge that information. Division 2

banking business of the Uommouwealth (ss. 12-lti) is headisl " .Acquisition of

Bank. Section 10 : Tlie provisions of Shares in FrivaU' Banks." Sei-tion 12

Divisions 2 and It of this Fart shall have gives authority to the Commonwealth

elTect notwithstanding anything in any Bank to purchase shares in private

other law, or in any charter or other banks. Section 111 provides that where

instrument, which is inconsistent with the Treasurer is satistieil that the

those provisions. l;lection 11 ; It majority iu numlier of the shares in an

shall be the duty of the Coinnionwealth .Australian private bank are .Au.straliau

Bank (11) to provide, in accordanci' shares, he may, by notici- publislusl in

with the conditions appropriate in the the

Oariette, declare that, U|«m a date

normal and proper oonduot of banking speiified iu the notice, the shares in

business, adequate banking facilities that hank which are Australian shares

for any State or person requiring upon that date shall be vested in the

them; (6) to conduct its businessCommonwealth Bank (sub-s. 1); upon

without discrimination except on such the date sjieeified in the notice the

grounds as are appropriate in the shares in the .Australian private bank

normal and proper conduct of banking eoneerned which, uimn that date, are

business; and (c) to observe, except -Australian shares shall be vested in the

as otherwise required by law, the Commonwealth Bank (sub-s. II); shares

practices and usages customary among which sub.sequently become .Australian

bankers and, in imrticular, not to shares shall upon the date ui>on which

divulge any information relating to, they become .Australian shares, be

or to the affairs of, a customer of the vested in the Commonwealth Bank

Commonwealth Bank except in eir- (sub-s. 4). Section 14 provides : The

eumstances in which it is, in accordance Commonwealth Bank shall, for all

with law or the practices and usages purjxises. be the holder of the shares

customary among bankers, necessary

purchased or otherwise acquireil under

HIGH COURT

[1948.

H. C. OF A.

As to s. 24—

By Latham C.J., Mich, Starke, Dixon and ]Villi((ms JJ. {McTiernan J.

1948. —'dissenting except as to s. 24 (8) ), on the grounds following :—By Latham

Bank of C.J. : By reason of the provdsions of s. 2J, the Act fails to provide just terms

N.S.W.

for an acquisition under s. 24 as recjuired by s. .51 (xx.xi.) of the Comstitution.

V.

TheBy Rich and Williams JJ. : The section is not within the power conferred ('O.MMON-by s. 51 (xxxi.) of the Constitvxtion, which does not authorize the taking over WEALTH.of a business in the manner jwovided by s. 24; regarded as a law for the

acquisition of property, the section is not related to any purpose in respect of which the Commonwealth has power to make laws, and, even if it was otherwise valid, it would fail because the Act does not provide just terms. Bv Starke, and Dixon JJ. : Just terms of acquisition are not validly provided, and therefore the section is not authorized by s. 51 (xxxi.) of the Constitution.

As to s. 25—

Per curiam, s. 25 does not come into operation because of the invalidity

of Part IV., Division 3, and further by Rich, Starke, Dixon and Williams JJ.

(Latham C.J. and McTiernan J. dissenting), s. 25 is invalid because it depends

for its operation on Part VI. which is invalid.

Rich and Williams JJ. (Latham C.J., Starke, Dixon and McTiernan JJ. contra), because it is inconsistent with s. 105a of the Constitution.

As to Part VI.— dissenting), because it conflicts with s. 75 (iii.) of the Constitution ; and also, by

As to Part 1̂11.— dissenting), because sub-ss. 4-8 of 8. 46 contravene s. 92 of the Constitution

the Division and shall be a member of to declare dividends; (h) to dispose

the Australian private bank in respect of the business in Australia of that

of those shares (sub-s. 1) ; the Com­Australian private bank to the Com­

monwealth Bank may transfer any of monwealth Bank ; and (c) to dispose

the shares to any person and that per­of all or any of the other business of

son shall, for all purposes, be the holder that Australian private bank. The

of tho.se shares and be a member of that exercise of any power under s. 19 (1)

(b)

Australian private bank in respect of or (c) is subject to the approval of the

those shares (sub-s. 2). By s. 15 the J’reasurer after the Treasurer has

Commonwealth Bank is required to obtained a recommendation from the

pay fair and reasonable compensation Governor of the Ccjmmonwealth Bank,

in respect of the ac(|uisition of shares

(s. 19 (2) ). iSubject to s. 19 (2), the

under s. 13. Division 3 (ss. 17-21) is

exercise of any jjower by the directors

headed “ Management of Private of an Australian private bank aji-

Banks.” Section 17 provides that upon pointed under s. 18 is in their sole

the date specified in a notice under s. 13discretion and is not subject to any

(I) the directors of the bank shall cea.se (jualitication, restriction or condition

to hold office, and provision is made for

provided by or under any law, charter

compensation. Under s. 18 the

or other instrument relating to the

Governor of the Commonwealth Bank exercise of the powers of the directors

may, with the approval of the of that bank. Section 21 renders in­

Treasurer, appoint directors of an Aus­effective provisions in any law, charter

tralian private bank the dii'ectors of or instrument specifying a nrinimum

which have ceased to hold oflice under

number of members in an Australian

s. 17. J'hese directors have full power, by virtue of .s. 19 (1) to manage, direct

private bank where the number of

member.s falls below the specified mini­

and control the business and affairs of mum by reason of the acquisition of

the Australian private bank of which shares by the Commonwealth Bank.

they are directors and, in particular, (a)

Division 4 (ss. 22-25) is headed ” Tak-

7() C.L.R.]

OF AUSTRALIA.

an<l the wction in not HcvcraMe ; anil alao, by Rich anil Winitims .l.J. {Latham

H. C. OF S.

C..J., Starke, DiJ-on iiml McTiernan J.l. contra), txjc-au.se aub-ss. 1 anil 4-H of s. 4b

194H.

are ini-oiiMistent with s. 105a of the Constitution.

Per Dixon J.: Sub-section .‘I

Bank

of

of 8. 4b fails because of the invalidity of preceding provisicms of the .-\et.

X.

S.W.

As to ss. 50, bO -

V.

The

Hy Rich, Starke, Dixon and Williams JJ. [jAitham C..I. and McTiernan J.

COM.MON-

dissenting), Iweause they are inseverable from the foregoing invalid provisions.

WF-AI.TII.

The |iro,visions of the Jiankimj Act 1047, if none of them was for any other reason invalid, would not amount to an inadmissible interference with the exereiscj by the States of their governmental functions.

So held, hy Lallaim

Starke, Dixon and McTiernan .J.l.

Melbourne. Corporation v. The. Commonwealth, (1047) 74 C.Jy.H. .‘11, distin­ guished.

A claim against the Commonwealth Hank, ns constituted under the Com­ monwealth Rank Art 1045, for the eompcmsation for which Hart VI. of the Rankimj .Jcl 1047 purports to provide would, if made the subject of an action against the Hank in the High Court, Ix' a claim in an action against “ the Commonwealth, or a person . . . sued on behalf of the Commonwealth ” in which jurisdiction is confc-rrcd on the High Court by s. 75l|iii.) of the Con­ stitution. Accordingly, the ])rovisions of as. 40 (2) and 42 of the Rankintj .4rt to the effect that compensation shall be determined as providcsl by the Act "and not in any other manner” are invalid in that thc-y purport to oust that jurisdiction of the High Court.

ing over the Husinesses of Hrivate ■Australian jirivate bank to take such

Hanks.” Sc'ction 22 make's provision action as is necr'ssary to vest in the

for agreements to take over such biisi-

Commonwealth Hank, uiion the date

nossc's. Section 25 provides for certain

of transfer or upon such later date as

taxation concc\ssions where the bu.si- the Commonwealth Bank sjiecities,

nc'sses are taken over by agres'ment. such assets (not Ix'ing .Australian assets)

Section 24 authorir.es the conpmhsory of that .-Australian private bank ns the

taking over of the businesses in .Aus­Comn'onwealth Bank s]>ecifiea. I’nder

tralia of the private banks. .All the s. 25 the Commonwealth Bank is

assets of a private bank which are requirtMl to pay fair and reasonable

Australian assets subsisting upon the eomjH'nsntion for pro|>ertv acquireil

date of transfer are vested in the under s. 24. Hart V. (ss. 26-.'l(i) estab­

Commonwealth Hank (sidi-s. 4). .All lishes a Federal Court of Claims. Part

the liabilities of the private bank VI. (ss. 57-45) is headeil “Assessment

which are .Australian liabilities sub­of Com])ensation,” and Division 1 (ss.

sisting upon the date of transfer become 57-41) “ Compensation in respect of the

liabilities of the Commonwealth Bank, .Acquisition of .Shares.” By s. 40 (2)

and the private bank is discharged the amount of compensation payable

from its obligations in respect of those shall, unless agreed upon, be deter­

liabilities (sub-s. .5). .Similar provision mined by the Federal Court of Claims

is also made in resjx'ct of assets of a and not in any other manner. Division

private bank which relate to banking 2 (ss. 42-45) provides machinery for

transactions and become .Australian reference of disputeil claims for com-

assets after the date of transfer and in jx>n8ation in respect of the acquisition

resjieet of liabilities which relate to of assets to the Federal Court of Claims.

banking transaetions and become .Aus­By s. 42 a claim is to be determined in

tralian liabilities after the date of trans­

accordance with the Division and in no

fer (sub-ss. C and 7). By sub-s. 8, the other manner.

Part A'll. consists only

Commonwealth Bank may require an

of s. 46, and is entitled “ Prohibition of

HIGH COURT

[1948.

H. C. OF A.

So held, by Bich, Sinrke, Dixon and Williams .IJ. (Latham C.J. and

1948.                 McTiernan J. dissenting).

Bank of

Observations on—

N.S.W.

(1) The meaning and effect of s. 51 (xiii.), (xx.), (xxxi.), (xxxix.), s. 75 (iii.)

V.and s. 92 of the Constitution.

The Common­

(2) The bearing of ss. 3 and 9 of the Banking Act 1947 on the interpretation

wealth.

of the other provisions of the Act.

(3) The effect of s. 6 of the Banking Act 1947 on the question of severability

of valid and invalid provisions of the Act.

Motions treated as trials of actions.

Five actions were brought in the High Court against the Common­ wealth and its Treasurer and the Commonwealth Bank and its Governor.

In the action which is hereinafter referred to as the first action, the plaintiffs were all the bodies named in Part I. of the First Schedule to the Bunkum Act 1947 (being bodies incorporated in Australia) and also individual shareholders in several of the plaintiff companies who purported to sue in a representative capacity.

In the action hereinafter called the second action, the plaintiffs were the three bodies named in Part II. of the First Schedule to the Act (being bodies incorporated in the United Kingdom).

In the actions hereinafter called the third, fourth and fifth actions, the plaintiffs were respectively the States of Victoria, South Aus­ tralia and Western Australia, the Attorney-General of the State being joined as co-plaintiff in each case.

In each action a declaration was sought that the Banking Act 1947 was, and, alternatively, vaiious sections of the Act were, beyond the powers of the Parliament of the Commonwealth,

the Carrying on of Banking Business his notice e.xtend the time. Sub-sec­

by Private Banks.” Private banlcs tion 8 forbids the private banks after

are prohibited from carrjdng on busi­the date or amended date specified to

ness in Australia, except as required

carry on business in Australia, and

by the section (sub-s. 1).

Each private provides a penalty of £10,000 for each

banlr is required, “ subject to this day on which a contravention occurs.

section,” to carry on banking business

Part VIII. (ss. 47-55) deals with the

in Australia (sub-s. 2).

The obligation protection of rights of persons employed

to carry on does not apply to a private by' private banks. Part IX.—

bank after its business has been taken “ General ”—includes s. 59 (examina­

over by the ComnDonwealth Bank

tion of records of private banks by

(sub-s. 3). Sub-sections 4-8 em­

persons authorized in writing by the

power the Treasurer, by a notice, to Governor of the Commonwealth Bank),

require a private bank to cease upon s. 60 (directors and officers of private

a date he specifies to carry on banking banks to assist in respect of transfer of

business in Australia. The period of business) and s. 61. The Common­

the notice must not in the first instance wealth guarantees the payment of all

be more than two months, but the compensation payable by the Common­

•Treasurer may by an amendment of

wealth Bank under the Act.

7«) C.L.R.]

OF AUSTRALIA.

H.

OF .4.

contrary to the (Constitution and void, and ancillary relief wa.s

194S.

claimed. The |)laintiffs in each action moved for an interlocutory injunction.

Bakk

or

.VthdavitH were filed, both in 8U[>port of, and in oj>position to, the

X.S.W.

V.

motions, the contents of which appear sufficiently for the purpo.ses

Thk

of this rej)ort in the judemc^ts hereunder.* The motions came Common­

wealth.

before Dixon •!., who, pursuant to the agreement of the parties, directed that they be treated as the trials of the actions and that they be heard together ami argued before, the Full Court.

liaru'ick K.C. and Cop/,el K.C. (with them A(Uim, Ashhurner,

K<l<lle.ston and /iHcn), for the plaintiffs in the finst action.

linrwick K.C. d'lK're are five broad grounds of attack upon the lionkhui Art I9'17 :■ (I) It falls und(‘r no head of legislative power. It is not a law on the subject of banking within s. .ol (.xiii.) of the Constitution. It is not within s. .'‘)1 (xx.). It is not acfpiisition on just t(‘rms for a purpose of Commonwealth power and is not within s. .01 (xxxi.). It is not within s. o) (.xxxix.). (t’) The ac(|uisition provisions, tin* nianagemcmt pro\isions and the pro­ hibition provisions are contrary to s. of the Constitution. (.’}) In so far as otherwise the ac(|uisition might be ju.stified, it is bad because it is not on just terms. (I) It invades the constitutional integrity of the States. (.0) It is inconsistent with the Financial Agreement and s. |Or),\ of the Constitution. I propo.se to argue that it docs not fall under s. .bl (xiii.) and that it is obnoxious to s. 9’J. It is proposed that Dr. ('opprl will then deal with s. .̂>1 (xxxi.), that counsel for the plaintiffs in the secoml act on will d(‘al with grounds f and o, and that counsel for the ytates will deal with ground 4. The .\ct does four things : (I) It ])rovides a method of acijuiring shares in any one or more or all of the banks, i.e., the compatiies set out in the F'irst Schedule, if .\ustralian. ('2) It provides a method for the management of any one or more of the .\ustralian banks, (.‘i) It provides methods of ac(]uiring the assets (and liabilities) of any one or more of the Australian banks and English banks. (4) It provides a means of prohibiting any one or more or all of the scheduled banks from carrying on the business of baidcing in Australia. The cjuestion is whether the pith and substance, the direct operation, of the Act is within the head or heads of )>ower. Part I., s. 3, the objects clause, has no significance ; the objects cannot be related to the

* See, partieularly, the judgment of Latham C.J., post, pp. 149-247.

8HIGH COURT

[1948.

H. C. OF A.actual provisions.

It might possibly affect the question under s. 92.

1948.As to s. 3 (rt), the expansion of the Commonwealth Bank’s business,

Bank of that must relate to its general trading division ; it can have nothing

N.S.W.

to do with its central-banking functions. The

Commonwealth Bank

V.

Act treats the departments as distinct entities ; contrast s. J7 with

The Common­s. 13. As to s. 3 {b) of the Banking Act 1947, it is not true that the

wealth.

banking business of the banks is alone to be taken over ; it is all the business. The words “ taken over ” are to be noticed. They refer to an assumption of control including an acquisition. There is in fact no limitation to assets used in the Australian business. As to s. 3 (c), “ private banks ” means the companies in the schedule. Section 5 contains a wide definition of assets, not limited to those used in banking. The definition of Australian assets depends upon situation, or what the law deems situation. It is inapt to connect the assets with banking in Australia as contemplated by the power in s. 51 (xiii.). So with “ liabilities deemed to be situated in Australia.” The impossibility of identifying the assets and liabili­ ties included goes to just terms because you cannot have just terms unless you can relate the thing to the terms definitely. Again with “ shares.” As to s. 6, it is not the formulation of a law : it

is a declaration of intention. It does nothing. It cannot require

the court to legislate. As to s. 7, the plaintiffs propose to contend

that State banking covers banking by a State as customer. As to s. 9, it is expressed in terms of purpose (not object, as s. 3) and relates to Divi.sions 2 and 3, but not Division 4, of Part IV. The expression “ facilitating the control ... of the banking busi­ ness in Australia of private banks ” would seem to imply the continuance of the business of private banks. It is an attempt to substitute, as a device for invoking the power, a statement of purpose for actual subject matter. Section 10 serves no useful purpose. If valid. Divisions 2 and 3 would in any case displace existing laws and instruments : if invalid, s. 10 will not help. Section 11 is material only as another confirmation of the view that the Act does not aim at the relations of banker and customer ; it seeks to avoid any change in them. Division 2—“ Acquisition of Shares in Private Banks ”—is a subject outside the banking power. Section 12 applies to English as well as Australian banks.

It gives power to make a voluntary purchase of shares. It adds a

new power to those of the Commonwealth Bank. To authorize a company to buy a share in a pastoral company is not to make a law about pastoral pursuits, and to empower the Commonwealth Bank to buy shares in a banking company is not to make a law with respect to banking. It may be good under the incidental

7() C.L.R.]

OF AUSTRALIA.

power, or it may relate to tlie incorporation of banks within s. 51

H. C. OF A.

(xiii.). Section 12 niii.st be considered with s. 14 and s. 21, which

194S.

attach consequences to a sale and purchase under s. 12 that invade Ban’k of

the field of conij)any law and vary the social contract of the members X.S.W.

V.

of the banking comf)anies. They go beyond the banking jwwer.

Thh

CO.MMON- WEALTH.

Section 14 (2) contemplates re.sale : ss. 12 and 14 (2) empower

tralficking in shares. Membershij) is conferred contrary to the articles of association, and the reduction of the number of mem­ bers below the nund)cr recjuired by statute or the constating instruments is authorizcal notwithstanding State law. This is not banking and not incidental to any Federal power. Section 13, unlike s. 12, jclaces the power in the Treasurer, wdio can act against the will of the Commonwealth Hank. The only condition is that he must be satisfic'd that the majority of shares in an .Custralian bank is or is cleemc'cl to be situate in .\ustralia. He may never­ theless be- wrong. There may be a change in the situation or character of the shares bc'fore the notice expires. Section 13 will not nc'c;essarily give the Commonwc*alth Hank a majority of the share's. Sc'ction 13 (I) and (2) enable the Trc'asurer to .selec.'t any bank and for any reason. 1’o give such an authority is not to make' a law with rc'sjH'ct to banking. Section 13 (3) seeks to “ vest ” shares irrespc'ctive of the articles and would ojeerate in clefea.sance of State law rc'gcdating the sociid contract. Sc'ction 13 (4) vests share's udiich become Australian sluires. When this is considered with s. 17 and s. IU,it mc'ans that the directors put in, by closing share rc'gistc'rs abrojid, might bring about the acejuisition of the share's abroad. Section I I apjec'ars to be essential to the comjelete ojeeration of a. 13 (3) or (4). Se'ction I5 is confined to comjeensation for shares eind does not extend to the acejuisition of as.sets by the exercise of the jeowers contained in ss. 17 and 18. Some of the articles do not give voting strength to a majority, so that even if a majority of shares were obtainc'd under s. 13, it would not in itself give control. Division 3 is headt'd “ Management of Private Banks.” St'ction 17 take's effect on the exj)irv of the notice, no matter whether the notice has ju'ove'd effective or not to vest a majority or any shares in the Commonwealth Hank, anel no matter whether that Hank retains them or has disposed of them in the meantime : compare s. 48, which is expressed to depend on actual vesting of the Atistralian shares. It is concerned with the internal regulation of the comj)any, not with banking. Section 18 gives the Governor of the Commonwealth Hank j)ower to appoint any number of direc­ tors, without limit and without qualification, and a chairman. For instance, bankruptcy would not be a disquahfication. Since by

HIGH COURT

[1948.

H. C. OF A.

s. 20 (2) the majority forms a quorum, three directors at least must

1948.be appointed, but otherwise there is no indication of number. There

Bank of is no express power of removal in this Act, but perhaps that is

N.S.W.

supplied b}̂ s. 33 (4) of the Acts Interpretation Act 1901-1941, if the

V.

position of director is an office or place. By s. 19 (1) the whole of

The Common­the business and affairs of the company (for “ bank ” means body

wealth.corporate named in the schedule), whether relating to banking or

not, is to be managed, directed and controlled by the new directors, whether Austrahan or not. The power to declare dividends is unaffected by any provision of the memorandum or articles of association as to rate, preferential rights, source or any prerequisite (s. 19 (3) ). Perhaps the words “ by or under any law ” free the directors from the fiduciary obhgations otherwise attaching to the office. These provisions may be taken together as a means of com­ pulsory acquisition without just terms, or separately as company control. Section 19 (1) (6) distinguishes between the business in Australia and that outside Australia of the private bardr. The Australian business may be disposed of to the Commonwealth Bank. Section 19 (1) (c) authorizes the disposal generally of other businesses of the private bank. Compare the distinction made by s. 22 (8) (a) and (h) with (c) and (d). The legislation concedes that the Australian and non-Australian businesses are two distinct things, not indis­ pensable one to another. Yet s. 3 {b) expresses the object as one to take over the business in Australia of private banks, and s. 9 as “ facilitating the control by the Commonwealth Bank of the banking business in Australia of private banks.” In s. 19 (1) (6)

and (c) the phrase is “ dispose of,” not “ sell.”

It is much wuder

than sale. It would enable them to give away the assets. All this in consequence of a notice under s. 13, which may not operate to vest a majority or any of the shares in the specified bank. As to Division 4—“ Taking over of Businesses of Private Banks ” : Again, as s. 22 (1) shows, the Treasurer is empowered to select any private bank for the application of the Division. That goes to the subject matter with respect to which the law is made. The notice under s. 22 (1) is the condition u])on which s. 24 operates. The powers of the Act may be used cumulatively and concurrently. By s. 13, the process for acquiring shares, appointing new directors and disposing of the business may be set in motion , at the same time an invitation may be given under s. 22 which will call into operation s. 24, leading to an acquisition of the business ; and also a notice might be given under s. 46 (4) requiring the cessation of the business. It is to be observed that the notice under s. 46 (4) is, by s. 46 (5), to be not more than two months, and that under

7() C.L.R.]

AUSTRALIA.

H. C. or .A.

H. 22 (I) is, by s. 22 (2), to be of not more than two months.

An

af'rcciiK'nt under ». 22 can hardly be called voluntary if a notice

1948.

has been ffiven under ,s. 4b (4). Under s. 22 you cannot agree as Bank

or

to part of the business because, under sub-s. (8), on the date of

.V.S.W.

V.

transfer all the Australian assets and liabilities go over without

The

CO.MMON- WEALTH.

nioi'e and overseas assets and liabilities, if they relate to banking,

go over upon their becoming Australian assets or liabilities. There seems to be a diflerence between “ taking over ” and “ acquiring ” ; perhaps the former looks to assumption of control. Sub-.section (7) aiithm'izes the extension of the agreement to any business,^&c., of the [trivate bank outside Australia ; it includes all the scheduled banks, iiu4uding, for example, the Mank of China. It goes beyond power on this ground alone. The date of transfer under s. 22 (l(q)ends apparently on agreement and is not that defined in s. 24

(I) : see s. 22 (!)).

Under s. 24 (5) and (b) a prescribed date limits

th(' operation of each sid)-section u|)on assets or liabilities becoming .Australian, but dilTerent dates may be prescribed. If that for liabilities is earlier than that for as.sets, an unequal and unju.st i'(‘sult may be produced. Section 24 (H) enables the Commonwealth Hardv to recpiire the |)rivate bank, sidqect to severe 'j)enalties, to take such action as is neccrssary to vest non-.Australian as.sets. Hut it is not limited to a.s.sets concerned with banking even ; still le.ss with baidving in .Australia. .As to Hart V.—“ The Fcsleral Court of Claims ” : sect ion .‘M cannot op(‘rate to exclude challenge on con­ stitutional grounds. Section gives jurisdiction to determine claims for comj)ensation. “ Claim ” includes title lus well as (|uantum : see a. .‘lb and s. 40 (I) and (.b). It is part of judicial power, and under s. 77) of the Constitution the jurisdiction of the High Court cannot be excluded. The words “not in any other manner ” in s. 4(t (5) cannot be struck out by the use of s. b. .As to Hart VI., Division 2, s. 42. There is the question what “ as.sets ” means here. Sections 4d and 44 direct the dis{)uted claim into the Court of Claims : and s. 4.̂) makes {)ayment by the Commonwealth Haidc of the amount assessed a discharge. .As to Hart ATI.—“ Pro­ hibition of the carrying on of Hanking Husiness by Hrivate Hanks ” : section 4b is Ix'tter read <as if sub-ss. (2) and (3) preceded sub-s. (1). 'Pliese three sub-sections seem to embody one pro^^sion, while sub-ss. (4) to (8) end)ody another. Section 4b is incidental to the acapiisition provisions and inseparable from them, but, alternatively, if it is separated, it is clearly tiot a banking provision. Aloreover, it is obnoxious to s. !>2 of the Constitution. It is not a law with resj)ect to banking, because it is not directed at the protection of the customer, at improving or dealing with banking facilities for

HIGH COURT

[1948.

H.

C. OF A,him. Its purpose is to preserve the business for the Commonwealth

1948.

Bank to take over when ready and then to authorize the Treasurer

Bank of

to stop the company carrying on business as a banker. Thus, it

N.S.W.

is ancillary. But sub-s. (4) gives the Treasurer an apparently

V.

Theuncontrolled discretion to shut up any bank independently of any

Common­other. No criterion or grounds affecting banking are indicated ;

wealth.there is no relation between the choice and the actual operation of

the law. The only connection with banking is that only the private banks in the schedule come within the category upon vvdiich

the Ti'easurer’s choice operates.

Section 8 of the Bcmhing Act 1945

(No. 14 of 1945) entitles them to an authority from the Governor- General in Council. New banks may obtain one. The 1947 Act, Part

VII., s. 46, leaves that untouched.

An existing banking company

may be singled out and stopped :

new companies may be authorized.

This shows that it is not “ banking ” that s. 46 is aimed at. As to Part VIII.—“ Protection of Rights of Persons employed by Private Banks ” : under s. 47 (4), where a benefit would, as a matter of practice, have been granted under the terms of employment or of a provident or superannuation fund, the expectation of a person employed in' a private bank in respect of which a committee under s. 47 (1) has been appointed is transformed into a right. Under s. 48, if a notice has been given under s. 13 and Australian shares are in fact vested as a result (though not necessarily a majority of the shares), persons then employed by the private bank shall continue so to be employed upon the terms and conditions applicable at that date or as siibsequently varied by competent authority : cf. s. 54 (2) as to pensions. Section 51 (1) requires that salary shall not be

reduced or terms made less favourable.

Thus, by combining s. 13

with these provisions, you can have a private bank continuing (its Australian shares having passed to the Commonwealth Bank, but otherwise the same separate commercial entity) and yet its relations with its employees affected as indicated. This must be outside the

power given by s. 51 (xiii.), (xxxi.) or (xxxix.).

There is no definition

of “ competent authority.” The result indicated continues to be true even if the Commonwealth Bank, having acquired the Australian shares, proceeds to dispose of them. Section 52 of the Act is directed to the danger of private banks conferring rights upon their employees more favourable than they would otherwise have received in order to give them undue advantages at the expense of the Commonwealth Bank. It would enable directors appointed under s. 18 to obtain for the company a variation of a contract made with its employee. Section 56 may be called an attempt at a statutory

7<i'0.L.R.]

OF AUSTRALIA.

novation. It i« only lU'ccHsary that the docninents and tran.sac-

H. C. or A.

tions ahonlfl relate to tlie buHiness taken over. It is not restricted

194S.

to banking. 'I'he proper law of the contract is ijitiored. It must Bank

or

be beyond power. Section 59 does not flepend upon notice having

X.S.W.

r.

been given under s. I.’’ or upon any other step having been taken The

towards exercising any powers conferred Ijy the Act, but is inde|jen-

WEALTH.

dent. Sectif)n <!0 must d<*pend on the validity of the preceding provisions. Sub-section (i) (h) would apj)arently a|)ply if there was a voluntary agreement under s. I’J. Section 01 (the Common­ wealth guarantee) do(‘s not amount to an a|)j)ropriation. To summarize* : (1) The* Ae;t gives powêr to the (.'ommonwealth Rank to purchase shares in a.ny schc'diiled “ private bank.” As an incid(*nt, in order to enable the Commonwealth Rank to take the place* e)f the* share*he)lele*r, the* Ae*t |)Uf|)e)rts te> make? it a shareholder, iinel se) with its tr!Uisferee*s, anel sets asiele the* articles anel any law e>r insti'ument re'epiiring a mininmm number of members (ss. 14 iind 21). (2) The .Act authorize*s the Treasurer to select an Aus- traliati private* batik anel by his notice* to ve*st in the Cemimonwealth Rank such etf its shares as are* Australian anel such as afterwarels be*e'e)me* A list m Han sha.re*s. (H) ()n the* e*x|)irv eif a notice, it elis|)laces the* maiiage*me*nt eif an Australian private bank anel [luts it in the hanels etf age*nts e>f the* ('omniemwe'alth te> wheun it gives complete |)e)wer eiver the business anel atfairs eif the company, inclueling a pe)we*r eif elis|)eisitiein. (1) It autheirize*s the Tre*asurer to .select any private* bank, whe*the*r .Australian or neit, anel by statute to vest all its busine*ss, assets anel liabilitie*s in Australia in the Ceimmein- we*alth Rank anel to rt'epiiie the transfe*r of any non-.Australian asse*ts. (5) It authorize's the Tre*asurer to select any private bank anel by his neitice |)i'ohibit the bank from carrying on its bu.siness eif banking in Australia. It will be seen that the so-called objects in s. .■$ ju'e* remeite'r purpose's eir motive's, |)e*rha|)s, but not the objects in the se*nse* of the substantial e*lTect or ojieration of the provisions, 'riie statement of the*se motives eannot give validity. They may be material to s. 92 of the Constitution. The ejui'stions to be dealt with first are (1) whether the .Act in substance and reality is legislation with re*spe*ct to any subjt'ct of Ft'deral legislative jiower, and (2) vi’hether it infringes the imihibition in s. 92. In dealing with the first, beginning with s. (i of the Act, it does no more, it is submitted, than provide a rule of con.struction ; its effect is that, if an operative residuum can be found in the enactment or any part of it after reject­ ing the invalid imivisions or jHirtions, an intention to enact it is to be assumed, though otherwise it might net have been apjiarent. If there is something left that will operate, though it is partial in its

HIGH COURT

[1948.

H.C. OF A. operation, it is to receive effect. When the provisions as to each

1948.matter are taken severally, it will appear that, tested for pith and

Bank of

substance, each set fails. In that approach s. 6 plays no important

N.S.W.

part. To take s. 12, it simply authorizes the Commonwealth Bank

V.

to buy shares in any of the scheduled banking companies,

The Common­Australian or English. In the case of shares in Australian banks

wealth.ss. 10, 14 and 21 produce further effects flowing from the sale.

A law authorizing the purchase of bank shares is not a law with respect to banking. The Commonwealth Bank is not to use the shares bought in connection with banking. It is quite uncertain to which division of the Commonwealth Bank such shares will belong. Presumably they will be capital assets forming a general investment as property and the dividends will be revenue of the institution, income from property. The purchasing of the share is not itself banking; the authorizing or empowering the transac­ tion is not legislation in respect of banking. The latter view is confirmed, by the addition, “ also . . . the incorporation of banks,” which implies that incorporating and empowering banks is not within the subject of “ banking ” as intended in s. 51 (xiii.) of the Constitution. “ The issue of paper money ” refers to an operation performed by bankers which is not conceived to be banking. Section 51 (xiii.), so far as it refers to banking, authorizes laws which really and substantially bear upon transactions or operations characteristic of banker and customer. The law must bear upon those transaetions

substantially.

That will include the relation of banker and customer

which springs out of the transactions. Examj)les arc laws for the stability of the banker, for the protection of the customer, for returns facilitating supervision in the customer’s interest. Some of the functions performed by the so-called central bank may not be banking, e.g., the control of the note issue, which more probably rests on s. 51 (xii.), currency, coinage and legal tender. But many are, because they bear upon transactions of banker and customer, e.g., the control of advances and interest rates. [He referred, as to the meaning of “ banking,” to Tennant v. Union Bank of Canada (1) ; Ex parte Walsh and Johnson ; Re Yates (2) ; Attorney-General for Canada v. Attorney-General for Quebec (3) ; Stenhouse v. Coleman (4) ; Melbourne Ccn'poration v. The Common­ wealth (5) ; Attorney-General for Alberta v. Attorney-General for Canada (6). In s. 51 (xiii.) the word is “ banking,” not “ banks,” the operation or function, not the person or body carrying it on.

(1) (1894) A.C. 31, at p. 46.(5)(1947) 74 C.L.R. 31, at pp. 51, 64,

(2) (1925) 37 C.L.R. 36, at p. 81.

69, 96.

(3) (1947) A.C. 33, at pp. 41, 42, 44.(6) (1947) A.C. 503.

(4) (1944) 69 C.L.R. 457, at p. 471.

7») C.L.R ]

OF AUSTRALIA.

Scpanitc words iiro used to autfiorizc tlie fjiving of cor|)oratc

H. (t. or A.

fxistcnco to a bank'. State harikinf' can only extend beyond the

1948.

limits of the State cf)ncerned l)y transactions. The power is over Bask

ok

tlie transactions or ojicrations characteristic of a banker which he

X.

.S.W.

r.

corifliicts, over the business of bankers, which is not nece.s.sarilv

Thk

the same as a banker’s business. The connotation does not change,

CO.MMOS-

the (hmotation may (!xtenfl. Regard must be had to the true WEALTH.

nature and character of the legislation, the pith and substance

{(idlliKlher V. Lipui, (I) ). “ With resjiect to” is not the .same as

“ for.” It means “ on the topic of.” A phrase u.sed by Ildpiim J. is “ directly regulatory of.” In the United States Constitution V(‘rbs appropriate to the subject are employed. You “ lay ” taxes, “ establish ” this and “ regulate ” that. A law to authorize the acfpiisition of shares in, or the busine.ss of, a corporation is not a law “ with resjiect to ” tlie activity in which that business engages. .\ law to em|)ower one merchandisinst comjiany to acijuire shares in another is not a law about merchandisinti. A law authorizing the Commonwealth Bank to take over a jiawnbroker’s business is neitluM' a law about pawnbroking nor about banking. This Ls con­ firmed by the jiresence of the exjiress jiower with resjiect to the incorporation of banks. If s. 12 of the .\ct is to be of any use, it niu.st be aidi'd by ,ss. I0, I t and 21. Without them it can effect nothing exia'jit a change of beneficial interest. This is imjiortant in considering wheth(»r, having regard to their real ojieration, the subject of these jirovisions is not a matti'r of conijiany law. The banking power does not extend to tin* variation of the social contract and of State law regulating the membershij), trail,sfer of shares and internal manageimmt of corjiorations. If it is said that the end is the exjiansion of tlu' business of the Commonwealth Hank and the taking over by it of the banking business in Australia of jirivate banks, as stati'd in s. (>, the answer is that there is no magic in its being the Commonwealth Bank. It is the same as if the jiurjiose was to exjiand the business of another jirivate bank and transfer the business of the first bank to it. To suggest it is in aid of central banking adds nothing. That depends on banking, i.e., the relation of banker and customer. Moreover, the elimination of all banks but one is the negation of central banking. The trading division of the Commonwealth Bank is the only one to which the acquired shares or as.sets could be annexed. It is a fallacy to argue that, because the banking jiower extends to authorizing a consider­ able measure of control, therefore it authorizes acquisition altogether. It is not banking simjily because a thing is given to a bank to do.

(1) (UKI7) A.C. S6'3, at p. S70.

1

HIGH COURT

[1948.

H.C. OF A. por instance, the powers given by ss. 95 and 96 of the Conunon-

1948. wealth Bank Act 1945 to the Industrial Finance Dej)artment,

Bank of including the ])urchase of shares, rest on s. 51 (xxxix.) of the

N.S.W.

Constitution, not on the banking power, or else the section is

V.

invalid. As to s. 3 (u) of the Bnnkin<j Act 1947, a law to

The Common­expand any farming business is not a law about farming. A law

wealth.for the licensing of banks is another thing, for it may be a measure

to secure integrity, continuity and other qualifications for the benefit of the customer and to give him confidence. Part II., Division 2, of the Banking Act 1945 is an illustration of a law with respect to banking. Sections 10, 14 and 21 of the 1947 Act are essential to s. 12 because it was never intended to authorize the purchase of a share in respect of which the Commonwealth Bank could not become a registered holder and member. In any case ss. 10, 14 and 21 cannot be supported as incidental to the acquisition for the purposes of banking. In Attorney-General for the Common­ wealth V. Colonial Sugar Refining Co. Ltd. (1) Lord Haldane says the words of s. 51 (xxxix.) of the Constitution do not seem to do more than cover matters which are incidents in the exercise of some actually existing power : See, too, the quotations in New South Wales V. The Commonivealth [Ao. 1] (2), and those made by Higgins J. in Ex parte Walsh and Johnson (3), where he adopts the phrase, “ whatever in a reasonable sense is necessary for the purposes, is impliedly granted.” A consensual purchase does not import, as reasonably necessary to effectuate it, the consequences set out in ss. 10, 14 and 21. Lastly, these jirovisions cannot be sustained by s. 51 (xx.) of the Constitution. Section 13 of the Banking Act 1947 depends, no doubt, on s. 51 (xxxi.), but that involves the use of s. 61 (xiii.) as the source of the “ purpose.” The purpose cannot be found in s. 9 ; it states a remoter object and one not within s. 51 (xiii.). The dominant purpose is to set aside the articles of association and State law, establish an overriding status in the company and take control by a])pointees. Taking control under ss. 17-20 does not depend on the vesting of shares under s. 13 but follows on the same notice. The use of the powder to supersede directors is not limited to particular grounds. The reason may be different from that wliich led to the selection of a j)articular bank by the Treasurer under s. 13. It is a company matter, not “ bank­ ing.” Section 9 cannot change its nature by declaring a j)ur])Ose claimed to be a banking purpose. Section 17 needs no more of

(1) (1914) A.C. 237, at p. 256; 17

(2) (1932) 46 C.L.R. 1.55, at pp. 212,

C.L.R. 644, at p. 655.

21,3.

(3) (1925) 37 C.L.R., at pp. 120, 121.

7i> C.L.H.]OF AUSTRALIA.

i:

H. C. OF A.

8. 11? tliiui Kiil)-H. (I), dewcrihin" tlie notice.

In this re.spect s. 17 Ls

unlike s. 18, wliich niakes the vesting of .Australian shares pursuant

194S.

to the notice a condition of its application. Sîction 1.'? (•'?), coujiled B.xxk

of

with s, 14 and s. '2\ (and j)erha[)s s. 10), may be said to attempt

X.S.W.

p.

to create a new set of rights, a new situation, not to acquire what

The

[ireviously existed. Sections 17-20 are direr ted, not to the control

Co.VfMON-

of banking, but to the control of assets, including a banking busines.s.

WE.\LTH.

4’he control is pro|)rietary. In s. 0 the words “control of the banking business in .Australia of private banks ” are directed to the taking of tli(‘ biisim'ss as such, a conueries of assets anel liabilities, to add them to other such assets and liabilities. The section is not directed to the regulation of ti'ansactions forming “ banking.” No change in the conduct of the transactions Ls contemjilated by the Act, as, indeed, is manifested by s. 11. Section 4(i (2) further secures it. The words “ banking business,” kc., in s. !» are the same as in s. 1!) (I) (/>) and describe what is to be disposed of as a |)icce of property. With respect to Division 4, it must be borne in mind that the jiurposes of s. do not include it. .At best it is attVeted only by the declaration of motive's contained in s.

.As already pointed out, the Division distinguishes between the .\ustralian and non-.Australian business and the banking and non­ banking assets and liabilities. It constitutes a law for acquisition, and, to sustain it, it must b<> shown that it subserves the subject of the banking power. 'I'o take a business that includes a banking business is not to do something within the* banking power. The incorporation, establishing and organizing, as a fully empowered authority, of the Commonwealth Bank is an e.xercise, not of the banking powei', but of the incidimtal powc'r. .As to the jMiwer under s. .Al (xiii.) of the Constitution to incoi |iorate banks, it mu.st be rei'ol- lected that the legislature did not endow a body of peojile with corporate life : there are no corjiorators in the Commonwealth Bank. Manv of its most important functions are not under the banking powi'r, e.g., the issue of the currency ; and a great deal of what it does must be sustained under a variety of jiowers ; it cannot be su|>ported as “ banking.” It is incidental to the exerci.se of the functions of government to have a bank as a financial agent, and, because of the need to handle large sums, the government bank trades as a banker to enable it to dispose of and control the money. It is lik(‘ till' view of Morshdll ('..I. in M'Culloch v. Manjhmd (1). Div ision 4 is simply a law to give jmqirietorship to going conceriLS, to a business or businesses. It acciuires the assets and assumes the liabilities on the basis of situation, actual or legally ascribed.

(I)

(ISUI) 17 C.S. :{1(5 [4 I.UVV. Kil. 579).

voi.. i-xxvi. 2

1

HIGH COURT

[1948.

H. C. OF A.

Sujjpose the business in Jjondon advances to a Jjondon resident

1948.who furnishes as security a mortgage over land in Victoria. Tlie

Bank ofinstrument includes a jiersonal covenant by the customer, and

N.S.W.

it is transmitted to Victoria. Its situation is here, but it has

V.

nothing to do with the Australian business of the bank.

Su|)pose

The Common­the same thing but with a New South Wales mortgage registered

wealth.under the Real Pro-perUj Act (N.S.W.), and therefore in New South Wales a specialty, but held by the bank in Victoria, where it would be a mere writing. A third illustration is that of a customer in England who there becomes a debtor of the bank and takes up his residence subsequently in Australia. The debt thus obtains an Australian situation. The nature of these assets, as illustrative of what is covered by Division 4, is material to the question whether the acquisition subserves a declared purpose which falls wdthin the conception of banking. How can it fulfil a purpose of regulating or affecting the transaction of banking business or the relation between bankers and their customers to acquire such assets ? The width of the acquisition shows that to jiossess the Common­ wealth Bank of property, not to control banking, was the substantial object of the law. The purj)ose must be nominated or appear, and then the necessary connection with it must exist in the accpiisi- tion authorized. That is why it is important to see that non­ banking and non-Australian business assets are covered. There is a vast number of assets taken in (jloho, whether connected with the banking business or not. How can that be a law with respect to banking or a purpose of banking ? It would include former bank premises still owned by the banking company but let to solicitors and dentists. The ]>ower is to take any one or more businesses and need not be exercised to establish a government monopoly. The mere statement of ])ur])ose in s. 3 (or s. 9) will not do ; if it would do, what is done goes beyond the statement; it is not a banking purpose. The Act nowhere says that the assets are to be used in a particular way. A further illustration is the fact that the acquisition under ss. 22 and 24 would include the amounts at the credit of the special accounts established by the private banlcs with the Commonwealth Bank pursuant to Division 3 of Part II., of the Baakirifj Act 1945. On acquisition they will cease ; if they have a banking significance their acquisition will end it. Under s. 24 (5) of the 1947 Act Australian liabilities are taken over, i.e., liabilities situated or deemed by law to be situated in Australia (s. 5). Section 24 (7) contemplates that liabilities will become Australian, i.e., that the test of .situation is such that change of .situation is possible. None of the legal te.sts of situation connect

7<i C.L.R.]

OF AUSTR.ALIA.

the lialiility with the hanking hasineas carried on in Au.stralia.

H. C. OP A.

J’roper law, reHidence of the debtor, locus solutionis, the.se have

l!»4S.

nothing connecting tlie liability with Australian banking : further,

Ka\k op

they do not admit of change of situation. The residence of the X.S.W.

r.

bank cannot be clianged. Tlie di.scretion of the Treasurer to select

The

a bank for his notice under s. 22 and s. 24 is uncontrolled. It is C'OMMOS-

WE.ALTH.

inconsistent with a connection witli banking. Section .3 cannot eke it out. Its statement of objects is not exhaustive, and, more­ over, they are motives and not immediate objects. Section .3 (n) merely recites a theory about.jiublic owner.sliiji and, perhaps, in addition, treats expansion of the banking busine.ss of the Common- wealtli Rank as in itself a legislative end. It speaks f>f the entire biisine.ss of the Commonwealth Ihink of whatever de.scrijition. Take by way of example Part JX. of the Cottiuumwcullh linuk Ad, which sets up the Mortgage Rank Department. It is not conci-ded that that is banking, but, however that may be, if that is to be exjianded by acipiisition, it would mean that, under the. power, the mortgage departments of trustee* compani(>s would be liable to be take*n over. Again, Part X.— Indu.strial Finance Ifejiartment—affords another instance. It enables the bank to provide money and assistance in setting up an undertaking ; it may lend money and buy or obtain shares. Section .'ll (xiii.) of the Constitution does not authorize suppression, total jirohibition ; it does not contemplate banking by the CoviTiiment, but is concenu'd with subjects conducting banking with their customers. The Commonwealth Rank owes its existence to the incidental ])ovvers (s. f)l (xxxix.) ). not to the lianking jiower (s. .fl (xiii.) ). It cannot be considered an e.xerci.se of the powi'r to incorporate banks. It incorporates no-ont*, and that is a jiowi'r to create an artificial person comjiosed of individuals but distinct from them. There is no instance of a corporation without corporators, and to make one is not an e.xerci.se of the jiower given in s. 51 (xiii.). There are corjiorators under the following Imjjerial .Vets; Itritish Overseas Ainetitfs .let l!>3!), ss. 1 and 2: ('tnil .let 1D.38; .Miuistn/ of ('ivil .Iviatiou .let lb 15 ; (\s/l Iiulustri/ Xntiouolization .let Ib lfi ; /i(Ni/,- of Eu(]hnd .let liIRi and lyondoti Passenger Trans­ port .let 1!)33. “ Four things are e.ssential to the creation of a corjioration, namely: (1) liawful authority of incorjioration ; (2) the jii'rson or jiersons to be incorjiorated ; (3) a corporate name; (4) words sufficient in law, but no jiarticular form of words is neces­ sary " (Halsbuiji, Laws of England, 2nd ed., vol. 8, p. 18). To give to this government activity a jiersonality in law, the incidental Jiower in s. 51 (xxxix.) must be relied on, as with most of the activitv itself. The Divisions of Part IV. of the Act have already

HIGH COURT

[1948.

H. C. OF A.

been dealt with sej)arately ; but, combining tlieni and dealing with

1948.the Part as one, the same observations a]jply. It remains wider

Bank of than the power and displays the same want of connection with the

N.S.W.

subject matter of the power. Section 46, which constitutes Part

V.

TheVII., has two as])ects. In one, it commands the continuance of

Common­banking operations : in the other, it allows the Treasurer to forbid

wealth.

them. In s. 51 of the Constitution the words “ with respect to ” become all important: they “ are not words of enlargement, but of indication. They indicate that you are to look to the following enumeration to see the actual subjects of the power ” {Waterside Workers' Federation v. Coinnionwealth Steamshij) Owners' Associa­ tion (J) ). Their effect depends u})on the subject matter and the way the power is expressed ; cf. Swan Hill Corporation v. Brad­ bury (2). Subject matter is no less important than expression. tVhen an activity is the subject of a power, iu the absence of express words the power will not authorize its complete supjwession. Prima facie, it is a power to govern the thing salva rei substantia. So, in Attorney-General for Ontario v. Attorney-General for the Dominion (3), Lord M’atson said ; “ A jiower to regulate, naturally, if not neces­ sarily, assumes, uidess it is enlarged by the context, the conservation of the thing which is to be made the subject of regulation.” “ Bank­ ing ” is sjiecific and narrow and not a subject calling for supjiression. As to form of exjiression, “ State banking extending beyond the limits ” &c. gives authority over the whole transaction in both States over which it extends. It is not limited to so much of it as

extends. It involves the denial of a power of supjiression. The

subject of the jiower must subsist in order to extend. The trans­ actions are necessarily consenvsual; i.e., characteristic of the relation between banker and customer. It is, therefore, in reality a jiower to make laws with respect to consensual transactions between a State bank and its customers extending &c. ; a jiower to regulate or make rules for the governance of banking transactions between subjects as bankers and their customers. There are three jioints that emerge from a consideration of s. 51 (xiii.) ; (1) It does not authorize supjiression of banking ; (2) the subject depends ujion a consensual relation, ujion consensual transactions, and the jiower cannot be exercised to change their nature in that respect; (3) the transactions are between the subject as banker and his cu.stonier : cf. Williams v. Melbourne Corporation (4). In Australian National Airways Pty. Ltd. v. The Commonwealth (5), Starke J., after quoting

(1) (192()) 28 C.L.R. 209, at p. 232.

(1933) 49 C.L.R. 142, at jip. 148,

(t)

(2) (1937) .56 C.L.R. 746, at pp. 75.5,

L55, 156.

761, 771.

(194.5) 71 C.L.R. 29, at pp. 76, 77.

(3) (1896) A.C. 348, atj). 362.

7«i C.L.R.]OF AUSTRALIA.

31H»

(h) thnl the (leferuhnil Uimh Trail Artnita/je atul every other jtertion for the lime, heimj entitled by law or purjwrtimj to

1W8-

e^ereiee the powers of the Governor of the (JommonweaUh

Bank of

Bank (f Australin he restrained from apjmntimj or purporl-

N.S.W.

V.

iiuj to appoint any person a direetor of any of tlie plauitiff

Thk

emnjsmies ;

Common­

(r) thol the tlefetdmd the Trejtsarer and any Minisier of the

wealth.

<lefendant the ('ommonwealth of Australia or any member of the Exeeutive Gouneil for the lime heiny actimj or pur/iortimi to art for (w oti behalf of the Treasurer of the Commomcerdth of Australia he restrained from yiviny or causing or per- mitliny to he given any notice pursuant to sub-s. (1) of s. 22 of the Banking Act 1!H7 ;

{d) that the defendant the ('ommonwe/ilth Bank of Australia its officers and servants he restrained from requiring any of the plaintiff comjHinies to lake any action pursiuinl to suh-s. (8) of s. 24 of the Bankimj Act 11)47 ;

{e.) that the defendant the 'Treasurer and any .Minister of the defendant the Conmiomvecilth of Australui or any member of the Executive Council for the lime beimj actimj or pur­ porting to act for or on behalf of the Treasurer of the Com­ monwealth of Austr(dia be restrained from publishimj or causing or permitting to be published in the Commonwealth Gazette any notice pursuant to sub-s. (4) of s. 4(5 of the Banking Act 11)47 ; and

(/) that the defendant Hugh Trail Armitage and ci'ery other person for the time being entitled by law or purjMtiing to exercise the powers of the Governor of the Commonwealth Bank of .lustndia be restrained from authorizimj any person to act under s. .'51) of the Bankimj Act 1D47.

Defendants to ihuj costs of pbtintiffs including reserted costs, if any.

Thk Hank ok Au.strai.asia and Others, No. 43 of 1947 v.

The (lOMMONWEALTH OF AUSTRALIA AND OTHERS.

Declare that the following provisions of the Banking Act 1947 are

intxdid : ss. 24, 25, 37 to 45 inclusive, 40, 59 and 60.

Order—

(a) that the defendant the Treasurer and any Minister of the defendant the Commonweahh of Australia or any member of the Executive Council for the time being acting or purport­ ing to act for or on behalf of the Treasurer of the Common­ wealth of Australia be restrained from giving or causing or

400HIGH COURT

[194«.

H. C. OF A.

permitting to be given any notice pursuant to sub-s. (1) of

1948,

s. 22 of the Banking Act 1947 ;

(6) that the defendant the Commonivealth Bank of Australia its

Bank

of

N.S.W.

officers and servants be restrained from requiring any of the

V.

The

plaintiff companies to take any action pursuant to sub-s. (8)

COMMON-

of s. 24 of the Banking Act 1947 ;

WBAETH.(c) that the defendant the Treasurer and any Minister of the

defendant the Commonwealth of Australia or any member of the Executive Council for the time beimj acting or purporting to act for or on behalf of the Treasurer of the Commonwealth of Australia be restrained from publishing or causing or permitting to be published in the Commonwealth Gazette any notice pursuant to sub-s. (4) of s. 46 of the Banking Act 1947 ; and

(d) that the defendant Hugh Trail Armitage and every other person for the time being entitled by law or purporting to exercise the powers of the Governor of the Commonwealth Bank of Australia be restrained from authorizing any person to act under s. 59 of the Banking Act 1947.

Defendants to pay costs of plaintiffs including reserved costs, if any.

The kState op Victoria and Another, No. 44 of 1947 v. The

Commonwealth of Australia and Others—

Judgment

in the

same terms as in Action No. 42 of 1947.

The State of South Australia and Another, No. 47 of

1947

v.

The

Commonwealth op Australia and Others—Judgment

in the same terms as in Action No. 42 of 1947.

The State of Western Australia and Another, No. 48

of

1947

V.

The Commonwealth of Australia .\nd

Others—

Judgment in the same terms as in Action No. 42 of 1947.

Solicitors for the plaintiffs; in the first action, Allen, Allen & Hem,sley ; in the second action, Blake r§ Riggall; in the third action, F. Q. Menzies, Crown Solicitor for Victoria ; in the fourth action, A. J. Hannan, Crown Solicitor for South Australia ; in the fifth action, R. V. Nevile, Crown Solicitor for Western Australia.

Solicitor for the defendants :

H. F. E. Whitlam, Crown Solicitor

for the Commonwealth.

K F. H.