Inglis v Commonwealth Trading Bank of Australia

[1969] HCA 44

HIGH COURT OF AUSTRALIA

Barwick C.J., Kitto, Taylor, Windeyer and Owen JJ. (THE RIGHT HONOURABLE MR. JUSTICE TAYLOR died at Sydney prior to the delivery of judgment in this appeal.)

INGLIS v. COMMONWEALTH TRADING BANK OF AUSTRALIA

(1969) 119 CLR 334

4 October 1969

Constitutional Law (Cth)

Constitutional Law (Cth)—Original jurisdiction of the High Court—Whether "the Commonwealth, or a person . . . sued on behalf of the Commonwealth" is a party—Commonwealth Trading Bank—Agency of Government—Emanation of Commonwealth—Commonwealth Banks Act 1959-1966 (Cth) (No. 5 of 1959—No. 93 of 1966)—Reserve Bank Act 1959-1966 (Cth) (No. 4 of 1959—No. 93 of 1966)—The Constitution (63 &64 Vict. c. 12), s. 75 (iii.).

Decisions

September 4.
The following written judgments were delivered:-
BARWICK C.J. I have had the advantage of reading the reasons for judgment prepared in this matter by my brother Kitto. As I entirely agree with his analysis of the relevant legislation, his conclusions and his reasons therefor, I have no need to do more than express myself on one aspect of the construction of s. 75 of the Constitution. The fundamental purpose, as it seems to me, of including par. (iii.) in this section of the Constitution thus giving original jurisdiction to this Court in all matters in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party was to ensure that the Commonwealth either in its form as established under the Constitution, or in any form with which it may lawfully clothe itself should not be compelled to pursue its rights in the courts of the States. The addition of the words "or a person suing or being sued on behalf of the Commonwealth" are to my mind a furtherance of this purpose. Consequently, in the construction and application of s. 75 (iii.) largeness rather than narrowness of approach is appropriate. If in reality the Commonwealth is before the Court in the litigation, no matter of form or of nomenclature can be allowed to deny the Court jurisdiction to hear and determine the rights asserted by or against it. (at p336)

2. I agree that the writ in this case initiated a matter in which the Commonwealth or a person suing or being sued on behalf of the Commonwealth was a party. There is no need to decide into which part of s. 75 (iii.) the matter falls. My own personal preference would be to regard the matter as one in which the Commonwealth was a party. (at p336)

3. I agree that the appeal should be allowed. (at p336)

KITTO J. The appellants issued out of this Court a writ addressed to the respondent as the "Commonwealth Trading Bank of Australia, a person being sued on behalf of the Commonwealth". An application by summons at chambers was thereupon made to a Justice to strike the writ out upon the ground that the respondent "is not a person capable of being sued on behalf of the Commonwealth", the implication being that the action was not within the jurisdiction of the Court. Whether the procedure was correct I do not stay to consider. The application succeeded, and this appeal is from the order striking out the writ. The specification in the writ of the forms of relief which the appellants seek suggests that the matter of complaint arose out of conduct of the respondent or of persons for whose acts it is responsible in the carrying on of its banking business. The sole question for decision on the appeal is whether an action against the respondent in respect of complaints of that character is within the original jurisdiction conferred upon this Court by s. 75 (iii.) of the Constitution "in all matters in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party". (at p336)

2. The purpose and effect of including in the constitutional provision matters in which "a person suing or being sued on behalf of the Commonwealth is a party" were examined in the judgments of Rich and Williams JJ., Starke J. and Dixon J. in the Banking Case (Bank of N.S.W. v. The Commonwealth) (1948) 76 CLR 1 and their Honours were of one mind on the question. As Dixon J. observed (1948) 76 CLR, at p 363 , there is the strongest presumption that in using the quoted expression the framers of the Constitution were not concerned with the Attorney-General or any other officer by or through whom the Crown might come or be brought into court. His Honour went on:

"What they were concerned with was amenability to the jurisdiction of persons in whom causes of action were vested, or against whom causes of action lay, but in their official capacity only and as agencies or emanations of the Commonwealth" (1948) 76 CLR, at p 363

The conclusion of all four Justices may be stated in one further sentence from his Honour's judgment:

"At all events, the purpose of providing a jurisdiction which might be invoked by or against the Commonwealth could not, in modern times, be adequately attained and secured against colourable evasion, unless it was expressed so as to cover the enforcement of actionable rights and liabilities of officers and agencies in their official and governmental capacity, when in substance they formed part of or represented the Commonwealth" (1948) 76 CLR, at p 367 (at p337)

3. All four Justices considered that the Commonwealth Bank of Australia as constituted by the Commonwealth Bank Act 1945 (Cth) was a corporate agency or instrumentality of the Commonwealth to perform the functions assigned to it by that Act and any other Act, and that accordingly an action against it in respect of the performance of those functions was within s. 75 (iii.) of the Constitution. As Rich and Williams JJ. observed, the Bank could be an agent of the Commonwealth (in the relevant sense) "whether or not it is performing governmental functions in the strict sense" (1948) 76 CLR, at p 274 . Their Honours went on to say that the absence of any corporators pointed to "an intention on behalf of the Commonwealth to transmute a part of itself into the outward form of a corporation as a convenient means of carrying on a Commonwealth activity" (1948) 76 CLR, at p 274 . (at p337)

4. The functions of the Commonwealth Bank of Australia as it then existed do not now reside in any one corporation. For that reason the Banking Case (1948) 76 CLR 1 does not decide the question before us; but it would of course be a mistake to assume that because the respondent in this appeal is established for more limited purposes than those of the former Commonwealth Bank of Australia it does not possess the character of "a convenient means of carrying on a Commonwealth activity" (1948) 76 CLR, at p 274 . The decisive question is not whether the activities and functions with which the respondent is endowed are traditionally governmental in character, though their possession of a traditional or generally accepted governmental character may well help in the ascertainment of the legislative intention. The question is rather what intention appears from the provisions relating to the respondent in the relevant statute: is it, on the one hand, an intention that the Commonwealth shall operate in a particular field through a corporation created for the purpose; or is it, on the other hand, an intention to put into the field a corporation to perform its functions independently of the Commonwealth, that is to say otherwise than as a Commonwealth instrument, so that the concept of a Commonwealth activity cannot realistically be applied to that which the corporation does? (at p338)

5. I do not think it is helpful to list those features of the Commonwealth Bank Act 1945 to which reference was made in the Banking Case (1948) 76 CLR 1 and see what a difference is made by striking off the features not now to be found in the legislation governing the respondent. The only point to be made from a comparison between the legislation in force in 1948 and the legislation now in force is, I think, that the functions which in 1948 belonged to a single corporation, under provisions which showed an intention that those functions were to be in reality functions of the Commonwealth performed through the machinery of a single corporation created for the purpose, are now divided between two corporations, the Reserve Bank of Australia and the respondent, the Commonwealth Trading Bank of Australia. It would not be unnatural to expect to find that as a result there were two Commonwealth agencies in the place of only one. (at p338)

6. What happened in 1959 was that in addition to the hiving off of the Commonwealth Trading Bank of Australia from the former Commonwealth Bank of Australia and the renaming of the latter as the Reserve Bank of Australia, two additional corporations were created for special purposes, and the Commonwealth Savings Bank of Australia, a corporation created by the Commonwealth Bank (Savings Bank) Act 1927 (Cth) to carry on the general business of a savings bank, was preserved in existence. Thus there are now five corporations: (1) the Reserve Bank of Australia which, under the provisions of the Reserve Bank Act 1959-1965, is the central bank of Australia, manages the Australian note issue, has a Rural Credits Department, and appoints its own officers to constitute what is called the Reserve Bank Service; (2) the Commonwealth Banking Corporation, a corporation created by the Commonwealth Banks Act 1959-1966, which has the functions of appointing officers to constitute the Commonwealth Banking Corporation Service, appointing temporary and casual employees, and providing and making available to the next three corporations to be mentioned "such officers and employees as are necessary for efficiently conducting the business of each of those banks"; (3) the Commonwealth Trading Bank of Australia, a corporation created by the Commonwealth Bank Act 1953, which has the function of carrying on general banking business including the general banking business formerly carried on by the Commonwealth Bank of Australia; (4) the Commonwealth Savings Bank of Australia, which has the function of carrying on the general business of a savings bank; and (5) the Commonwealth Development Bank of Australia, a corporation created by the Commonwealth Banks Act 1959, which has the function of providing finance for primary production and for the establishment or development of industrial undertakings. None of these corporations has any corporators, and I respectfully agree with Rich and Williams JJ. that that circumstance is significant as pointing to a conclusion that the intention of the Parliament was to give the Commonwealth "the outward form of a corporation as a convenient means of carrying on a Commonwealth activity" (1948) 76 CLR 1, at p 274 . (at p339)

7. It will be seen that in point of organization the three banks provided for by the Commonwealth Banks Act 1959, the Trading Bank, the Savings Bank and the Development Bank (to use the short titles employed in the Act), may be regarded as the three prongs of a trident. For the performance of their respective functions they all depend upon a single staff which the Banking Corporation appoints to its own service and then distributes among the three banks as the needs of their respective businesses require from time to time. The only exception is that each has its own general manager, but he is appointed by the Governor-General, and acts under the managing director of the Banking Corporation and in accordance with the policy of the bank and with any directions of the Board of the Banking Corporation or of an executive committee of that board appointed for the relevant bank. (at p339)

8. But there is much more than that. While each bank has its own board, the Board of the Banking Corporation has power to determine the policy not only of that Corporation itself but also of the Trading Bank, the Savings Bank and the Development Bank in relation to any matter, and to control not only its own affairs but also the affairs of those three banks. In the exercise of these powers the Board of the Banking Corporation has a general duty to ensure that the policy of the Corporation and the banking policy of each of the three banks "are directed to the greatest advantage of the people of Australia and have due regard to the stability and balanced development of the Australian economy". It is instructive to observe that this statement of the Board's duty resembles in character, though it is not identical in terms with, the statement of the duty of the Commonwealth Bank of Australia in s. 8 of the Commonwealth Bank Act 1945. In that Act the stability of the currency of Australia, the maintenance of full employment in Australia and the economic prosperity and welfare of the people of Australia were specified as purposes to which the Bank's exercise of its powers should contribute; and they continue to be so specified in s. 10 (2) of the Reserve Bank Act 1959. For the three banks dealt with in the Commonwealth Banks Act 1959-1966 the more comprehensive expression above quoted is used; but the intention is not less clear that the policies of those banks and the Banking Corporation which staffs them shall be directed wholly and solely to ends which are of the essence of the central (i.e. the federal) government of the country. (at p340)

9. But the indications of intention in the Act by no means stop there. The Board of the Banking Corporation has not the final say as to policy. It is required to inform the Government from time to time of the banking policy of the three banks whose policy it determines, and in the event of a difference of opinion between the Government and the Board as to whether any such policy is directed to the best advantage of the people of Australia and has due regard to the stability and balanced development of the Australian economy the Treasurer of the Commonwealth and the Board are to endeavour to reach agreement, and if they cannot the Governor-General, acting with the advice of the Federal Executive Council, may by order determine the policy of the Corporation or any of the three banks. The policy as so determined must not be inconsistent with the monetary and banking policy of the Reserve Bank, but that policy in turn is (by s. 11 of the Reserve Bank Act) determined in the final resort by the Governor-General acting with the same advice. (at p340)

10. To all this must be added a few other considerations. The first concerns the constitution of the Board of the Banking Corporation. As in the case of the Reserve Bank, all the members of the Board are appointed by the Governor-General, except one who is the Secretary to the Department of the Treasury; and all are remunerated as the Governor-General determines. Next, it is true of each of the three banks governed by the Commonwealth Banks Act 1959-1966 as well as of the Reserve Bank that its capital comes wholly from sources within the Commonwealth bank system or the Commonwealth itself. Each bank must pay to the Banking Corporation its proportion of the expenses of the Corporation, and must pay the other banks for any services rendered by them. Its net profits either go back into the system or are to be paid to the Commonwealth. In the case of the Trading Bank the net profits so dealt with are as ascertained after provision for income tax; and that bank, alone of the three, is made liable to pay income tax by the provision in s. 24A of the Income Tax Assessment Act 1936 (inserted by the amending Act No. 110 of 1964) that the Trading Bank is not a public authority for the purposes of s. 23 (d) which exempts from tax the revenue of a public authority constituted under an Act. See also s. 119 of the Commonwealth Banks Act 1959-1966. This increases the Commonwealth's participation in the profits, but otherwise its effect seems only to be to assimilate the yearly financial statements of the Trading Bank to those of the non-governmental banking companies with which it is in competition. Although at this point a difference exists between the Commonwealth Bank Act as in force at the time of the Banking Case (1948) 76 CLR 1 and the present Act, it does not seem to me to affect the question we have to consider. A point that does affect it, however, and seems to me to provide a strong indication of the substantially government character of the Trading Bank, the two other banks governed by the Commonwealth Banks Act 1959-1966, and the Banking Corporation that ties all three together in the way I have described, is that s. 120 subjects the accounts and financial records of all four bodies to inspection and audit by the Auditor-General, and provides for his reporting to the Treasurer the results of his inspection and audit and drawing the Treasurer's attention to any irregularity that is of sufficient importance to justify his doing so. (at p341)

11. When all these considerations are taken into account, the conclusion seems to me inevitable that the Trading Bank, the Savings Bank and the Development Bank are established simply as instruments by which the Commonwealth participates in the business of banking. Indeed, with great respect for the opinion of those who see the matter differently, I regard the Commonwealth Banks Act as providing probably as clear an example as one could hope to find of the setting up of an integrated system of government banking through the medium of a co-ordinated group of corporations created ad hoc. Of the original Commonwealth Bank Act 1911 Griffith C.J. said in Heiner v. Scott (1914) 19 CLR 381 :

"Probably the true effect of the Act is a declaration that the Commonwealth itself may carry on the business of banking under the name of the 'Commonwealth Bank of Australia'" (1914) 19 CLR, at p 393

The Banking Case (1948) 76 CLR 1 shows that the statement is true without the word "probably"; and in my opinion a similar statement may be made with respect to the provisions of the Commonwealth Banks Act 1959, substituting for the "Commonwealth Bank of Australia" the names of the three banks amongst which that Act divides so much of the business of government banking as the Reserve Bank Act has not declared that the Commonwealth may carry on under the name of the "Reserve Bank of Australia". (at p342)

12. I conclude that the respondent in this appeal, the Trading Bank, is truly to be described, in terms of the title of its Act, as one of "the Commonwealth Banks". When sued as it is here it is, in my opinion, sued as being the emanation by which the Commonwealth operates in the field of general banking, and is therefore "sued on behalf of the Commonwealth" in the sense which the Banking Case (1948) 76 CLR 1 shows to be the true sense of that expression in s. 75 (iii.) of the Constitution. (at p342)

13. For these reasons I would allow the appeal. The summons at chambers states as an additional ground for striking out the writ that it discloses no cause of action; but that is not a ground of objection to a writ. The summons in my opinion should be dismissed. (at p342)

WINDEYER J. I have had the advantage of reading the judgment of Kitto J. I agree in it entirely. I do not wish to add anything. (at p342)

OWEN J. The appellants in person issued a writ out of this Court against the Commonwealth Trading Bank of Australia (which I will call the "Trading Bank") in which they claimed:

"1. An injunction to restrain the defendant Bank and its servants from taking any action under demand notice authorized by the defendant and signed by its servant and manager, Roger Francis Berkeley Fitzhardinge, and dated 30th August 1968, the said demand is for the payment of $31,641.16 to the defendant by the plaintiffs. 2. A declaration that the plaintiffs owe no sum to the defendant either under Indenture of Mortgage registered No 27/8497 or otherwise but that the defendant is indebted to the plaintiffs and an order that the defendant return the title deeds to the land 'Lammermuir' to the plaintiffs immediately. 3. An injunction to restrain the defendant its agents or servants or otherwise from molesting the plaintiffs in any manner or form in their possession of their property known as 'Lammermuir', on Lake Meadowbank, in the Derwent Valley, Tasmania. 4. An order that the defendant pay exemplary damages to the plaintiffs for conspiring to libel and libelling the first named plaintiff in the letter written by the defendant's former manager in Tasmania, Edwin Chester Gifford, to the then general manager of the defendant on 28th December 1962, whereby the plaintiffs have been much injured in their property, credit and reputation and have suffered damage and injury and the damage and injury has continued since the said 28th December 1962, and is still continuing. 5. A declaration that the defendant and its servants have conspired to libel and have libelled the first named plaintiff. 6. A declaration that the defendant and its servanrs have conspired with the Hobart solicitors Peter Benson Walker and Peter Hamilton Tilley Stops of 116 Collins St., Hobart, to aid and abet the aforesaid Hobart solicitors to defraud and cheat and hoodwink and deceive the plaintiffs. 7. A declaration that the defendant and its servants have been in breach of their statutory duty towards the plaintiffs and have acted ultra vires their powers to the injury and damage of the plaintiffs. 7A. Damages for breach of contract. 8. Damages. 9. Such sum as may be allowed on taxation for costs. 10. Such other order, declarations or injunctions as to the Court may seem just. 11. An order that title to the land 'Lammermuir' aforesaid vest in the plaintiffs unencumbered by any alleged debt to the defendant." (at p343)

2. It is impossible to discover from these allegations what exactly are the grievances of which the plaintiffs complain. What is clear, however, is that in an endeavour to bring the case within the original jurisdiction of this Court the appellants claim that in respect of these grievances, whatever they may be, the "Trading Bank" is "a person being sued on behalf of the Commonwealth", within the meaning of those words in s. 75 (iii.) of the Constitution. I take that to mean that, by virtue of the legislation under which the "Trading Bank" is constituted and under which it conducts its banking business, it is a "part of, or an agency of, the central government", to use the words of Dixon J. (as he then was) in Bank of N.S.W. v. The Commonwealth (1948) 76 CLR 1, at p 359 , and was acting as such in the transactions, whatever they were, which gave rise to the appellant's complaints. In support of their contentions, the appellants, naturally enough, place much reliance upon the decision in the Banking Case (1948) 76 CLR 1 while the respondent contends that, in carrying out its banking functions, it is not a part of, or an agency of, the Commonwealth Government. To determine these competing submissions it is necessary to compare the legislation which this Court was called upon to consider in the Banking Case (1948) 76 CLR 1 with that which was introduced by a series of Acts, the Commonwealth Banks Act, the Reserve Bank Act and the Banking Act, all of which were passed in 1959. In the Banking Case (1948) 76 CLR 1 it was held that the Commonwealth Bank, not, it should be noted, the "Trading Bank" which did not have a corporate existence until 1953, was "a person being sued on behalf of the Commonwealth" in proceedings taken to have declared invalid provisions of the Banking Act 1947 which purported to enable the Commonwealth Bank, as then constituted, to take over the businesses of the private banks and to do so, in effect, on the direction of the Commonwealth Government. The powers and functions of the Commonwealth Bank under the Commonwealth Bank Act 1945 and the Banking Act 1945 were summarized by Rich and Williams JJ. in that case (1948) 76 CLR, at pp 272, 273 and by Dixon J. (as he then was) (1948) 76 CLR, at pp 359, 360 . I do not repeat what was there said. It is, I think, sufficient for present purposes to say that while the Bank was authorized to carry on general banking business it was also a central bank and, if requested to do so, was required to act as the financial agent and banker of that Government. It controlled the Australian note issue. It was declared not to be liable to pay land or income tax or any State tax to which the Commonwealth itself was not subject. Its general monetary and banking policies were, in the last resort, subject to governmental control and in connexion with the acquisition of the businesses of the private trading banks under the Banking Act 1947 it was "completely subject to the dictation of the Treasurer". These were some of the considerations which led to the conclusion in the Banking Case (1948) 76 CLR1 that under the legislation then in force the Commonwealth Bank was an agent or instrumentality of the Commonwealth. But in the case of the "Trading Bank" a great many of these features do not exist. It was set up in 1953 as a corporate entity for the purpose of carrying on general banking business, an activity which had earlier been committed to the Commonwealth Bank. The Act of 1953 was repealed by the Reserve Bank Act 1959 but by the Commonwealth Banks Act 1959 the "Trading Bank's" entity was preserved. The effect of the 1959 Acts was to repeal the Commonwealth Bank Acts of 1945, 1948, 1951 and 1953 and divide up the various activities previously carried on by the Commonwealth Bank amongst a number of separate corporate bodies, the Reserve Bank of Australia, the Commonwealth Banking Corporation, the "Trading Bank", the Commonwealth Savings Bank and the Commonwealth Development Bank. As a result of this division of functions the Reserve Bank is now the Central Bank and the banker and financial agent of the Commonwealth Government, and controls the note issue. The "Trading Bank", as its name suggests, does no more than carry on the general business of banking. It is required to pay income tax and is, along with the private banks, subject to the wide powers and authorities conferred upon the Reserve Bank by the Banking Act 1959 relating to such matters as statutory reserve deposits, the mobilization of foreign currency, the policy to be followed by trading banks in relation to advances, foreign exchange control and the control of interest rates payable to or by banks. In all these respects the "Trading Bank's" functions differ widely from those which were exercised by the Commonwealth Bank under the earlier legislation. It is true that the Board of the Commonwealth Banking Corporation, under the Commonwealth Banks Act 1959, determines the "Trading Bank's" policy and controls its affairs and that from time to time that Board is required to inform the Government of the banking policy of the "Trading Bank", along with the policies of the Commonwealth Savings Bank and the Development Bank, and that if, in any case, a difference of opinion arises between the Board and the Government whether any such policy is directed to the greatest advantage of the people of Australia and has due regard to the stability and balanced development of the Australian economy and such difference cannot be settled by agreement between the Commonwealth Treasurer and the Board, the Government may in the last resort determine the policy to be adopted and must accept responsibility for the adoption of that policy. It is true also that the members of the Board of the Commonwealth Banking Corporation, other than the Secretary to the Treasury, are appointed by the Governor-General; that a close liaison is required to be maintained between the Corporation and the Treasury and that each is required to keep the other fully informed on all matters which jointly concern the corporation, the "Trading Bank", the Savings Bank, the Development Bank and the Treasury. Furthermore the "Trading Bank" is required to pay to the Commonwealth one half of its net profits, after making provision for income tax. But notwithstanding these links between the Commonwealth Government and the "Trading Bank" and the fact that the Government may through the Reserve Bank exercise wide powers of control over its general banking policy as well as over the general banking policies of the private banks, I am of opinion that the "Trading Bank" in the conduct of its general banking business is not to be regarded as a part of, or an agency of, the Commonwealth Government so as to enable an action to be brought against it in the original jurisdiction of this Court as being "a person sued on behalf of the Commonwealth". (at p346)

3. I would therefore dismiss the appeal. (at p346)

Orders

Appeal allowed with costs. Order appealed against set aside and in lieu thereof order that the summons to strike out the writ be dismissed with costs.