Melbourne Corporation v Commonwealth

74 CLR 31
[1947] ALR 377

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(Judgment by: Rich J.)

Briginshaw v.
Briginshaw

Court:

Judges: Latham CJ

Rich JStarke J
Dixon J
McTiernan J
Williams J

Judgment date: 15 and 16 July, 13 August 1947

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Judgment by:
Rich J.

The question raised by the demurrer now before us is as to the constitutional validity of s 48 of the Banking Act 1945, which, in effect, prohibits a bank from conducting any banking business for a State or for any authority of a State, including a local governing authority, except at the will of the Commonwealth Treasurer. It is sought, on behalf of the Commonwealth, to support the provision by reference to s 51, pl. (xiii), of the Commonwealth Constitution, which grants to the Parliament of the Commonwealth power to make laws with respect to banking, other than State banking: also State banking extending beyond the limits of the State concerned, the incorporation of banks and the issue of paper money.

I may say at once that I agree with the submissions that the section relates to banking, and that it does not relate to State banking in the sense in which that phrase is used in the placitum, namely the carrying on by the State of the business of banking. While the word "banking" is sometimes used in a colloquial and crude sense to mean the payment of money to the credit of a customer's account at a bank, the word in its normal and ordinary signification denotes the business of banking. Some assistance in defining "banking" can be obtained from the Bills of Exchange Act 1909-1936. In this Act the word "'banker' includes a body of persons, whether incorporated or not, who carry on the business of banking," and though banking is not defined in this Act it seems reasonable to believe that one legislative interpretation of the word would be the business carried on by a banker. In the case of Commissioners of State Savings Bank of Victoria v Permewan, Wright & Co Ltd (1914) 19 CLR 457, at pp 470, 471, Isaacs J, as he then was, said: "The fundamental meaning of the term" (banking) "is not, and never has been, different in Australia from that obtaining in England. Various writers attempt various definitions, more or less discordant, and many of them referring to functions that are now very common and convenient, and even prominent, as if they were indispensable attributes. The essential characteristics of the business of banking are, however, all that are necessary to bring the appellants within the scope of the enactments" (s 83 of the Victorian Instruments Act 1890 and s 88 of the Bills of Exchange Act 1909) "and these may be described as the collection of money by receiving deposits upon loan, repayable when and as expressly or impliedly agreed upon, and the utilization of the money so collected by lending it again in such sums as are required. These are the essential functions of a bank as an instrument of society." And see Thomson's Dictionary of Banking, 9th ed (1939), p 55. In my opinion s 51(xiii) must be construed in the light of what I consider to be the ordinary and normal meaning of the word "banking" and if this be so, the words "Banking other than State banking" should be construed as meaning the business of banking other than the business of banking carried on by a State. This view is, I think, confirmed by the remaining words of pl. (xiii) "also State banking extending beyond the limits of the State concerned, the incorporation of banks and the issue of paper money." It is difficult to believe that the words "also State banking extending beyond the limits of the State concerned" were intended to mean the use by the State as a customer of banking facilities in more than one State and the other words "the incorporation of banks and the issue of paper money" clearly support the view I have expressed. I may add that in the Banking Act itself the Commonwealth Parliament appears to have regarded State banking as the business of banking carried on by a State. This appears to be the obvious meaning of "State banking" in s 5 of the Act. But whatever may be the meaning of "banking" the proper interpretation of the words "other than State banking" is, that the Commonwealth Parliament, while empowered to make laws with respect to banking, is not empowered to make laws with respect to State banking, unless it extends beyond the limits of the State concerned.

In Merchant Service Guild of Australasia v Commonwealth Steamship Owners' Association (No 2) (1920) 28 CLR 436, at p 451 Higgins J said: "Where the Constitution means that the powers conferred on Parliament shall not be applied to the State operations, it expressly says so, as in pl. xiII (banking); pl. xiv (insurance)." See also Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129, at p 158.

The question then is, whether the provision being prima facie within power, it is obnoxious to the Constitution. The first point to be kept in mind is that the Constitution expressly provides for a federal form of government involving the existence of both Commonwealth and States, the Commonwealth having conferred upon it only certain limited and defined legislative powers, and the States, within the limits of their own Constitutions, retaining exclusive powers in the field which remains after all Commonwealth powers have been exercised to the full extent of their widest scope. It is unnecessary to trace in detail the authorities by which the relationship of Commonwealth and State powers have been defined. The view once prevailed that any legislative or executive act of the Commonwealth which would, if valid, interfere with the free exercise by a State or its instrumentalities of their legislative or executive powers was pro tanto invalid. At a very early stage, however, there were decisions inconsistent with this view, and it was finally exploded by the Engineers' Case (1920) 28 CLR 129. There is no general implication in the framework of the Commonwealth Constitution that the Commonwealth is restricted from exercising its defined constitutional powers to their fullest extent by a supposed reservation to the States of an undefined field of reserved powers beyond the scope of Commonwealth interference. But this is always subject to the provisions of the Commonwealth Constitution itself. That Constitution expressly provides for the continued existence of the States. Any action on the part of the Commonwealth, in purported exercise of its constitutional powers, which would prevent a State from continuing to exist and function as such is necessarily invalid because inconsistent with the express provisions of the Constitution, and it is to be noted that all the powers conferred by s 51 are conferred "subject to this Constitution." Such action on the part of the Commonwealth may be invalid in two classes of case, one, where the Commonwealth singles out the States or agencies to which they have delegated some of the normal and essential functions of government, and imposes on them restrictions which prevent them from performing those functions or impede them in doing so; another, where, although the States or their essential agencies are not singled out, they are subjected to some provision of general application, which, in its application to them, would so prevent or impede them. Action of the former type would be invalid because there is nothing in the Commonwealth Constitution to authorize such action by the Commonwealth. A general income tax Act which purported to include within its scope the general revenues of the States derived from State taxation would be an instance of the latter.

I come now to s 48 of the Banking Act 1945. Subs (1) of this section provides that "except with the consent in writing of the Treasurer, a bank shall not conduct any banking business for a State or for any authority of a State, including a local governing authority". Though this subsection is expressed with some skilfulness, it necessarily implies that no State or authority of a State including a local governing authority can become the customer of a bank except with the consent in writing of the Treasurer. It has been laid down frequently by the Judicial Committee that in considering the constitutional validity of legislation it is necessary to look at the pith and substance of the legislation. For a recent statement of this principle see the remarks of Lord Porter in Attorney-General for Canada v Attorney-General for Quebec (1947) AC 33, at p 43. Moreover I think it is not competent for the Commonwealth or a State under the guise or the pretence or in the form of an exercise of its own power to carry out an object which is beyond its powers. See Attorney-General for Alberta v Attorney-General for Canada (1939) AC 117, at p 130. In my opinion, the pith and substance of s 48, however ingeniously expressed, is that a State or an authority of a State, including a local governing authority, must have the consent of the Treasurer in order to become the customer of a bank. Even assuming that "State banking" is not restricted to the business of banking conducted by a State or any authority of a State and that it includes banking by a State as a customer of banks, I think while power in a State and in its essential agencies to carry on the business of banking cannot be impaired, the power freely to use the facilities provided by banks, under modern conditions, must be regarded as essential to the efficient working of the business of government, and that power also cannot be impaired. Accordingly, whatever meaning may be given to "State banking," s 48 must be considered as wholly invalid.

It is interesting, although by no means conclusive, and in a sense perhaps hardly relevant, that in the federation of the United States of America there has been a somewhat similar development in constitutional law. The case of The Collector v Day (1870) 78 US 113 (20 Law Ed 122), having been overruled by Graves v New York (1939) 306 US 466 (83 Law Ed 927), the operation of discriminatory and non-discriminatory legislation affecting States has been examined in New York v United States (1946) 326 US 572 (90 Law Ed 326). It had already been dealt with to some extent by this Court in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657, at pp 674, 681-683, 687-688, and Tasmanian Steamers Pty Ltd v Lang (1938) 60 CLR 111, at pp 125-126.

In my opinion the demurrer affords no answer in law to the plaintiff's claim and should be overruled.